Managing director liability for cyber attacks: What management needs to know

Managing director liability for cyber attacks: What executives need to know

In an increasingly networked business world, the threat of cyber attacks is also growing. This means growing responsibility for managing directors, as they can be held legally liable for protecting their company's digital infrastructure. The liability of managing directors in the event of cyber attacks has increased significantly in recent years due to stricter regulations such as the GDPR and the new EU directives on cyber resilience. The requirements for IT security and data protection have become more complex and it is no longer enough to simply implement technical measures. Managing directors must also ensure that organizational and preventive measures are taken.

• The legal responsibility of the managing director
• Obligation to minimize risk
• New EU directives and stricter obligations
• Conclusion: Preventive action protects managing directors from liability in the event of cyber attacks

The legal responsibility of the managing director

In Germany, a managing director is obliged in accordance with § 43 GmbHG to Diligence of a prudent and conscientious manager to take the necessary precautions. This means that they must take proactive protective measures for all risks that affect the company - and that includes cyber risks. This responsibility ranges from implementing suitable IT security measures and regularly reviewing systems to creating a cyber resilience strategy that makes the company resistant to cyber attacks.

Obligation to minimize risk

Responsibility for IT security and data processing is part of a managing director's duties. Today, cybersecurity is just as much a part of the management of a company as financial and legal aspects. Corporate management. This also includes measures for Risk minimization. These can be of a technical nature, such as the installation of Firewalls and anti-malware systems, but also organizationally: for example, by training employees and setting up processes to regularly check for security vulnerabilities. The managing director must ensure that clearly defined steps can be taken in the event of an attack - from containing the damage to reporting the incident to the relevant authorities.

The risks can be considerable in the form of fines, reputational damage and civil claims, especially if it turns out that security gaps have been caused by neglect or a lack of care. It is not enough to introduce protective measures once. Rather, they must be continuously monitored and adapted.

Managing director liability for cyber attacks: New EU directives and stricter obligations

With the advent of new EU directives, such as the Cyber resilience law and the NIS2 Directive, the obligations of managing directors are being further tightened. These directives oblige companies to implement higher security standards, particularly in the area of critical infrastructure. The harmonization of cybersecurity requirements within the EU makes it necessary for companies to proactively take measures to identify and defend against cyber threats.

For managing directors, this not only means additional administrative burdens, but also increased personal responsibility. The guidelines set strict deadlines and standards for responding to security incidents and provide for severe penalties for violations. These penalties can amount to up to 4 % of annual global turnover, taking liability risks to a new level. The introduction of these regulations aims to make the entire EU area more resilient to the growing threats of cybercrime, while increasing the accountability of company management.

Preventive measures for managing directors

Managing directors should take several preventive measures to minimize their liability in the event of cyber attacks:

1. Development of a comprehensive security strategy
   A proactive IT security strategy should take all possible threat scenarios into account. This includes the implementation of technical protective measures such as firewalls, encryption and intrusion detection systems (IDS), as well as organizational measures such as employee training and awareness campaigns.
2. Regular audits and risk assessments
   Cyber threats are constantly changing and therefore security strategies need to be regularly reviewed and updated. External audits help to identify vulnerabilities and ensure that security measures meet current standards.
3. Introduction of an incident response plan
   A quick and coordinated response is crucial in the event of an attack in order to limit damage. An incident response plan should define clear responsibilities and processes so that everyone involved knows what steps to take in an emergency. This also includes rapid communication with customers, partners and authorities.
4. Employee training and safety culture
   The majority of cyber attacks are caused by human error, such as phishing or social engineering. Regular employee training in handling sensitive data and cyber threats is therefore essential. A strong security culture within the company can significantly reduce potential risks.
5. Take out cyber insurance
   Cyber insurance can help to limit financial losses in the event of a cyber attack. It offers protection against the direct costs of an attack, such as restoring data, and can also cover legal and regulatory costs.

Conclusion: Preventive action protects managing directors from liability in the event of cyber attacks

The demands on managing directors in the area of cybersecurity are constantly increasing. New EU regulations and strict national laws mean that the duty of care in connection with cyber threats is becoming ever more comprehensive. Managing directors must therefore act proactively and ensure that their companies are well positioned both technically and organizationally. Regular audits, the introduction of an incident response plan and employee training are essential in order to effectively ward off cyber attacks and minimize liability risks.

Personal liability for IT security incidents is not a theoretical risk, but a real threat. If you neglect IT security, you run the risk of not only getting the company into serious trouble, but also yourself. Are you sufficiently prepared as a managing director? The right strategy can make the difference between a managed incident and a financial and legal disaster.