Managing cyber risk in organizations and supply chains

In the Industry 4.0, modern organizations are characterized by an extensive digitalization and use of Information Technology (IT). Even though there are significant advantages in such a technological progress, a noteworthy drawback is represented by cyber risks, whose occurrence dramatically increased over the last years. The information technology literature has shown great interested toward the topic, identifying mainly technical solutions to face these emerging risks. Nonetheless, cyber risks cause business disruption and damages to tangible and intangible corporate assets and require a major integration between technical solutions and a strategic management. Recently, the risk management domain and the supply chain literature have provided studies about how an effective cyber risk management process should be planned, to improve organizational resilience and to prevent financial drawbacks. However, the aforementioned studies are mainly theoretical and there is still a significant lack of empirical studies in the management literature, measuring the potential effects of cyber threats within single companies, and along networks of relationships, in a wider supply chain perspective. The present thesis aims at filling some of these gaps through three empirical essays. The first study has implemented a Grounded Theory approach to develop an interview targeting 15 European organizations. Afterwards, the fuzzy set Qualitative Comparative Analysis (fsQCA) has been performed, in order to ascertain how managers perceive cyber risks. Results contradict studies that focus merely on technical solution, and confirm the dynamic capability literature, which highlights the relevance of a major integration among relational, organizational, and technical capabilities when dealing with technological issues. Moreover, the study proposes a managerial framework that draws on the dynamic capabilities view, in order to consider the complexity and dynamism of IT and cyber risks. The framework proposes to implement both technical (e.g. software, insurance, investments in IT assets) and organizational (e.g. team work, human IT resources) capabilities to protect the capability of the company to create value. The second essay extends the investigation of the drawbacks of cyber risks to supply chains. The study conducts a Grounded Theory empirical investigation toward several European organizations that rely on security and risk management standards in order to choose the drivers of systematic IT and cyber risk management (risk assessment, risk prevention, risk mitigation, risk compliance, and risk governance). The evidence gleaned from the interviews have highlighted that investments in supply chain mitigation strategies are scant, resulting in supply chains that perform like they had much higher risk appetite than managers declared. Moreover, it has emerged a general lack of awareness regarding the effects that IT and cyber risks may have on supply operations and relationships. Thus, a framework drawing on the supply chain risk management is proposed, offering a holistic risk management process, in which strategies, processes, technologies, and human resources should be aligned in coherence with the governance of each organization and of the supply chain as a whole. The final result should be a supply chain where the actors share more information throughout the whole process, which guarantees strategic benefits, reputation protection, and business continuity. The third essay draws on the Situational Crisis Communication Theory (SCCT) to ascertain whether and how different types of cyber breaches differently affect the corporate reputation, defined as a multidimensional construct in which perceptions of customers, suppliers, (potential) employees, investors and local communities converge. Data breaches have been categorized into three groups by the literature, meaning intentional and internal to the organization (e.g., malicious employees stealing customers’ data), unintentional and internal to the organization (e.g., incorrect security settings that expose private information), and intentional and external to the organization (e.g., ransomware infecting companies’ software). However, this is among the first study to analyse the different reputational drawbacks these types may cause. Moreover, the study considers that, in the industry 4.0 era, social media analysis may be of paramount importance for organizations to understand the market. In fact, user-generated content (UGC), meaning the content created by users, might help in understanding which dimensions of the corporate have been more attacked after a data breach. In this context, the study implements the Latent Dirichlet Allocation (LDA) automated method, a base model in the family of “topic models”, to extract the reputational dimensions expressed in UGC of a sample of 35 organizations in nine industries that had a data breach incident between 2013 and 2016. The results reveal that in general, after a data breach, three dimensions—perceived quality, customer orientation and corporate performance— are a subject of debate for users. However, if the data breach was intentional ad malicious, users focused more on the role of firms’ human resources management, whereas if users did not identify a responsible, users focused more on privacy drawbacks. The study complements crisis communication research by categorizing, in a data breach context, stakeholders’ perceptions of a crisis. In addition, the research is informative for risk management literature and reputation research, analysing corporate reputation dimensions in a data breach crisis setting.