Cyber risk is now part of how private capital protects value. These takeaways come from the Private Equity Breakout Session at Invest Canada ’25, sponsored by Resilience Cyber Insurance Solutions.
Cyber resilience has become a core component of value protection. That was the central message in the private equity breakout session at Invest Canada ’25, sponsored by Resilience Cyber Insurance Solutions. Drawing on real-world case studies and first-hand experiences, panelists made one point clear: private capital firms must treat cyber resilience as a strategic imperative. It is no longer sufficient to approach cybersecurity as a diligence item or compliance obligation. Cyber risk now cuts across every stage of the investment lifecycle, from pre-acquisition diligence to value creation, governance, and exit.
While general partners (GPs) have long assessed operational and reputational risks during diligence, the conversation is evolving. Cyber exposure is no longer viewed as a technical issue. It now sits at the centre of value protection and enterprise growth. Firms that fail to assess these risks rigorously may face consequences that are financial, reputational, and strategic.
Threats are expanding in scope and sophistication. Cyberattacks are not limited to large enterprises. They are appearing in lower mid-market companies, in businesses operating with distributed teams, and across environments built on SaaS infrastructure. Panelists highlighted how threat actors increasingly exploit integrations and third-party access points that are often overlooked. Many attacks rely on social engineering tactics targeting finance staff, executives, or vendors to bypass systems and gain control.
One speaker emphasized that business email compromise is becoming a more frequent and damaging threat than ransomware. These compromises often evade detection entirely and lead to direct financial theft or vendor payment fraud. Unlike high-profile ransomware attacks, many of these incidents occur quietly. They are not disclosed to regulators, and they are rarely prosecuted. Yet they cost companies millions and are especially damaging in the lower mid-market. Attackers understand the visibility gaps that exist in smaller companies and use long-term persistence techniques to remain undetected. By the time a breach is discovered, it is often too late. Funds have been siphoned off, systems are compromised, and the damage is done.
A second panelist shared a case in which a portfolio company failed to detect a cyber intrusion in its accounting system. The breach persisted through two audit cycles and resulted in losses in the seven-figure range. The attackers had embedded themselves inside the company’s financial reporting software, quietly manipulating account routing and authentication rules. Because the attack relied on what appeared to be legitimate credentials, it was not flagged by standard tools. Customers of the company began reporting suspicious transactions, and it still took weeks to uncover the source of the issue. The firm ultimately dealt with not only financial losses but a reputational hit among its customers and partners.
What stood out throughout the session was not just the severity of cyber risk, but how frequently it is underprioritized within PE firms. In many cases, cybersecurity oversight is still viewed as a function of IT. According to the panelists, this framing is out of date. Today, cyber risk must be embedded in investment memos, reflected in valuation models, and addressed in post-close integration plans. It is no longer optional to include cyber readiness as a board-level topic.
Several speakers noted that many private equity deals are still moving forward based on incomplete or outdated assessments. A SOC 2 report or IT checklist is not sufficient. Investors must now consider whether the company’s data architecture can be recovered in a worst-case scenario, whether backups are immutable, and whether identity management protocols can be enforced across multiple systems. In many instances, breaches occur not because technology is lacking, but because the fundamentals—such as access governance and vendor visibility—are weak.
When cyber incidents do occur, panelists warned against the default reaction of spending heavily on new tools. Without understanding the root causes, such investments often fail to prevent future incidents. They also noted that forensic investigations take time. In the immediate aftermath of a breach, firms and portfolio companies should not expect immediate answers. It often takes weeks to uncover what happened and where vulnerabilities exist. That timeline must be accounted for in both public response and internal management.
The conversation turned toward the importance of structured resilience planning. Insurance was once seen as a safety net, but many policies now involve protracted disputes over coverage exclusions. According to panelists, resilience comes from integrating cybersecurity into ownership models. This includes building playbooks, preparing scenario plans, stress-testing systems, and practicing incident response drills well before a breach occurs.
The regulatory landscape is also changing. Jurisdictions including Canada have tightened breach notification laws, and failure to detect or report a cyber incident could now trigger penalties, sanctions, or forced disclosures. In today’s environment, the cost of non-compliance may extend far beyond the impacted portfolio company. It can affect the reputation and fundraising prospects of the GP itself.
Several panelists called for greater ownership of this issue within investment teams. Firms must normalize cybersecurity as a standing item in board meetings and build cyber awareness into operating models. That means executives need to understand the business impact of cyber risks and be prepared to respond. Tabletop exercises and scenario planning should become routine, not reactionary.
The speakers also cautioned against over-reliance on managed service providers. While external support can play a role, attackers have increasingly learned to target these vendors directly, using the trust relationship to compromise client networks. When portfolio companies lack visibility into how their vendors manage security, the risk compounds quickly.
There was growing recognition that limited partners (LPs) are paying closer attention to this issue. As one speaker put it, cybersecurity is beginning to emerge as a factor in fundraising. LPs are asking questions about incident history, portfolio exposure, and preparedness. They are beginning to benchmark cyber readiness in operational due diligence processes. In some cases, a lack of preparedness is now a gating issue for re-ups or new commitments. GPs that can demonstrate clarity, strategy, and operational maturity are better positioned to maintain trust and momentum during fundraising.
A third real-world example emphasized this point. A private equity firm had reached advanced diligence with a target company when they uncovered that the company’s operational system had been quietly compromised for several months. The due diligence process had failed to flag it earlier. Once exposed, the acquirer demanded a significant discount. The sellers accepted, but the deal was delayed by months and required major effort to restore stakeholder confidence. The reputational damage was not limited to the portfolio company. The GP had to answer questions from internal teams and LPs about how the oversight occurred.
These are no longer edge cases. Cyber failures are appearing more often, with wider implications for value realization, exit timing, and GP credibility.
Throughout the session, panelists returned to the same idea: cybersecurity must become part of how firms create and protect value. Investors are now operating in a market where resilience, trust, and discipline drive differentiation. Cyber readiness intersects with all three.
Forward-thinking firms are beginning to embed cyber capabilities into their value creation strategies. They are doing so by reducing the volatility of operations, improving transparency with LPs, and enhancing the attractiveness of portfolio companies at exit. These efforts often involve shifting culture as much as process. The firms that treat cyber risk as an internal lever rather than an outsourced item are already seeing performance benefits.
One panelist framed it this way: a breach is no longer just a bad day for IT. It is a question of governance, strategic execution, and investor trust.
In closing, the panel reinforced the idea that cybersecurity is no longer a technical footnote. It is a risk discipline and a competitive differentiator. In a world where attackers do not need to break down the door, and instead only need one distracted employee or one overlooked integration, every firm should assume a cyber event will happen. The only question is whether your firm and your portfolio companies will be ready when it does.
Since 1979, Invest Canada has been where Canada’s private capital community comes together to build relationships, close deals, and share real-world experience. It’s the definitive forum for GPs and LPs to connect, collaborate, and uncover new opportunities. Learn more at conference.cvca.ca.
