Protecting Your Dealership’s Future: The Role of Cyber Resilience in Valuation
In our previous article, we emphasized the importance of strong cybersecurity protocols and their impact on a dealership’s valuation. In this article, we explore the potential impact of cyber leaks on your supply chain processes, customer retention, employee turnover, and social marketing strategies, all of which ultimately affect the value of your dealership.
As M&A activity continues to be prominent throughout multiple industries, it is important to look at valuation from a cyber gap lens whether you’re acquiring or selling a dealership.
The post production supply chain is a crucial aspect of any dealership’s operations. We understand that the average retailer relies on an intertwined network of suppliers that are either OEM-approved/non-approved or contracted directly by retailers. A cyber leak can compromise the security of your own internal systems and create pressure points on your Continuity of Business protocols. We have recently seen the cyber-attack on Ferrari1 and its stance on ransomware from threat actors, but it is only a matter of time before a breach will occur at the dealer level. How will you handle this scenario?
Customer retention is another key factor in dealership success. Cyber leaks can lead to a loss of trust and damaged relationships with your customers if their personal and financial information is not adequately protected. This can make customers less likely to do business with you in the future, leading to lost revenue and ultimately impacting your dealership’s valuation.
Employee turnover can also be affected by cyber leaks. If employees feel their personal information or confidential work-related data has been compromised, they may look for employment opportunities elsewhere, resulting in higher turnover rates and potential disruptions to your dealership’s operations. On the flip side, if you have employee turnover, how do you handle offboarding former employees to make sure they don’t have access to your systems?
Social Marketing strategies can also be compromised by cyber leaks. In today’s selling environment, we allow employees to socially brand themselves to increase sales for the individual and the dealership’s total sales. If confidential information about your target customers, such as their buying habits or contact information, is exposed, what are the consequences that lead to valuation post-breach? This may be a gap worth investigating and reviewing your governance strategy as it pertains to Mobile Device Management, MDM, and the use of corporate or employee-owned devices.
In conclusion, cyber leaks can have significant and far-reaching consequences for any company. As reported in Harvard Business Review…
“A hack can sink a company’s stock price and leave investors fuming. In the wake of the Capital One hack, which was publicly reported in July 2019, the company’s stock price dropped nearly 6% immediately in after-hours trading, losing a total of 13.89% over two weeks. Likewise, following the announcement of the Equifax breach back in early September of 2017, the company saw a similar negative reaction from the stock market with its stock price plunging from $142.72 to $92.98 in just one week. What is worse, its market share dropped significantly in 2017 and has struggled to recover ever since.” 2
Dealerships are under increasing pressure from regulatory agencies to implement strong cybersecurity protocols. By taking proactive steps to protect against cyber threats, dealerships can improve their financial performance, increase their value, and achieve long-term success.
Contact Laura for a free, confidential consultation on how to impact your valuation equation most effectively!
For information on how to comply with regulations as they apply to dealerships, please get in touch with Hugo Cabello.
Laura Lemco is President of Dealership Valuation Services, LLC
[email protected] (303) 994-6919
Hugo Cabello is President, EaseGuard Governance | Compliance | Risk, An HCA Company.
[email protected] (571) 888-4434
1 https://robbreport.com/motors/cars/ferrari-cyber-incident-customer-data-incident-1234821378/
2 https://hbr.org/2020/08/a-cyberattack-doesnt-have-to-sink-your-stock-price
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