Five Questions With: Kenneth Marks

Kenneth Marks, a research adviser to American Express, talks about data security in light of recent breaches at Home Depot and JPMorgan Chase & Co. He discusses how mid-sized companies are adapting to changing technologies and working to protect proprietary information.
As research advisor to American Express, Marks helps develop and analyze research relevant to middle market companies. He is the Founder and Managing Partner of High Rock Partners and the lead author of Middle Market M&A: Handbook for Investment Banking and Business Consulting and the Handbook of Financing Growth: Strategies, Capital Structure and M&A Transactions.

PBN: Are companies becoming more concerned about data security given recent breaches (JPMorgan Chase, Home Depot, celebrity iCloud photos)?
MARKS:
Yes, recent data breaches have made data security top of mind for many companies. In fact, the recent American Express Survey of Mid-Sized Companies shows that 79% of middle-market companies ($5 million to $1 billion in annual revenues) plan to increase their investment in data security.

PBN: Are data breaches becoming more common? Are there as many happening now, as say, five years ago?
MARKS:
Yes, but it depends on the type of breach, as not all are malicious or intentional. Many data breaches are server related; access to servers continues to increase as more enterprise applications are remotely hosted or transitioned to the cloud. If you couple this with remote access from work-at-home employees and off-shore support centers, it provides greater access points for potential breaches.
PBN: How are small, mid-size and large companies responding to concerns about data security? Is one group more proactive than another?
MARKS:
The American Express survey shows that businesses ranging from lower middle market companies ($5-50 million in revenues) through larger middle market companies ($100 million to $1 billion in revenues) are increasing their investment in data security. Our data indicates that 37% more of larger companies plan to increase their investment relative to the smaller ones. It is likely that the larger companies have the budgets to be more proactive whereas smaller firms are likely using their resources to focus primarily on compliance. Regardless of size, it’s safe to say that recent cyber-attacks have created a sense of urgency for all businesses and they are taking steps to protect their proprietary and customer information.

PBN: Technology is constantly changing – what steps do you recommend to keep data secure? Do you advise against traditional payment methods (checks) or are they safer than e-payments?
MARKS:
This is a complex question that could take pages to answer. At a high level for businesses, constant attention, testing and management of systems is critical – staying on the front-side of issues and being prepared to address situations. Regarding checks, my understanding of the state of technology leads me to believe electronic payments are likely more secure than traditional payment methods, in many cases eliminating some of the risks and complexity. E-payments allow institutions to implement safeguards like biometrics and other means of authentication that increase security and streamline the processing time.

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PBN: How can a company improve its relationship with customers after a data breach? Do you find that customers will go elsewhere after a data breach?
MARKS:
Customer relationships rely on trust, credibility and good products or services. In the case of a data breach, use the situation as an opportunity to communicate with customers, be proactive in protecting the customer’s interest, demonstrate that doing business beyond the breach is safer, and show how your company will continue to earn their business.

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