Cyber risk management strategies in deposit money banks: Implications of cybersecurity investment and cyber insurance on profitability

Abstract

As digitalization is on the increase, deposit money banks are faced with heightened exposure to cyber threats, which pose significant risks to their financial performance and operational stability. This study investigated how cybersecurity investment and cyber insurance affected the profitability of deposit money banks, to know whether preemptive cybersecurity management strategies and transfer of risk through insurance influence financial results in the banking sector. The results revealed that both cybersecurity investment and cyber insurance have significant positive effects on bank profitability, with coefficients of 7.832 (p < 0.01) and 17.08 (p < 0.05), respectively. The study also revealed that cybersecurity investment provides more accurate estimates than cyber insurance which is reflected in its narrower confidence intervals. The results emphasize the strategic role of cybersecurity investment and insurance to improve financial flexibility, reduce operational risk, and support enduring profitability. It concluded that banks that prioritize these strategies will not only mitigate possible losses from cyber incidents but also gain a competitive advantage through strengthened customer trust and operational efficiency. The study recommended that Nigerian deposit money banks should treat cyber insurance as a vital component of cyber risk management strategies. It is also recommended that bank management should treat cybersecurity expenditure as value-adding investments rather than operational costs.

Keywords: {'name': 'Cyber security, cyberattack, cyber insurance, cyber security investment, profitability'}

Authors & affiliations

Ayobaye Salemcity
University of South Africa

Elza Odendaal
University of South Africa

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