Risky Business: Government Contractor's Access to Classified Information

Lockton shares insights on how private sector companies must be more vigilant than ever when working with sensitive information.

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Oct 09, 2014, 01:44 ET

WASHINGTON, Oct. 9, 2014 /PRNewswire/ -- Today, U.S. government contractors are inextricably linked to the federal government, its agencies, and the constituents which they collectively serve. As a result, private sector companies are at risk of innocently transforming data into classified or sensitive materials by bringing together bulk data into aggregated sets.

"The intentional leaking of sensitive government information by employees has had a significant impact on some government contractors and will continue to grow as an exposure," said Ryan Gibney, Assistant Vice President in the cyber liability team at Lockton Companies' Washington, D.C. office. "Protecting against this exposure is imperative to government contractors."

Not only do these matters create the potential for financial loss to the organization, but they also create management liability risk for those in the boardroom and executive suite. This new reality, highlighted by the examples of recent cyber security breaches, calls into question the importance of quality insurance protections, where the nature of sensitive federal government work creates heightened regulatory and shareholder risk.

In their recent white paper, "Keeping It Confidential," Gibney and Cliff White, in Lockton's Global Technology and Privacy Practice, outline the ways a contractor could be adversely impacted if an unauthorized disclosure arises, such as through:

A third-party lawsuit
Regulatory actions and penalties
Liquidated damage losses (e.g. veteran's protected health information)
Direct, first-party financial impact relative to immediate suspension, cancellation, or nonrenewal of the government contract
Reputational harm or impact to revenues (e.g. adverse media coverage, across nongovernment-related services and products.)

The direct, first-party harm resulting from loss of revenue attributable to these government contracts is potentially the most catastrophic aspect of a security breach. Even more alarming is that it is an area not addressed by the traditional Errors & Omissions and cyber programs.

"Unauthorized access or release of protected data and information by rogue employees, criminals, national states, and terrorist organizations has emerged as a top threat to contractors over the past several years," explained White.

About Lockton
More than 5,300 professionals at Lockton provide 41,000 clients around the world with risk management, insurance, and employee benefits consulting services that improve their businesses. From its founding in 1966 in Kansas City, Missouri, Lockton has attracted entrepreneurial professionals who have driven its growth to become the largest privately held, independent insurance broker in the world and 10^thlargest overall. Independent researcher Greenwich Associates has awarded Lockton its Service Excellence Award for risk management for large companies. For six consecutive years, Business Insurance magazine has recognized Lockton as a "Best Place to Work in Insurance." To see the latest insights from Lockton's experts, check Lockton Market Update.

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