The Top 5 Cyber Risks Every SMB Should Take Seriously — and Why Cyber Insurance Is Not Optional
- Alan S
- Oct 27
- 6 min read
Small and medium-sized businesses (SMBs) often assume that they’re too small to be targeted by cyber criminals. That’s a myth. According to Insurance Experts, while large enterprises may have deeper pockets, they often have stronger security platforms. SMBs, by contrast, frequently operate with limited resources and competing priorities, making them an attractive target.
Below we walk through the five most common cyber-risks facing SMBs today and then make the case for why having proper cyber-insurance (and being compliant with its terms) is a crucial part of your defense strategy.
1. Phishing
Phishing remains the single most effective way for attackers to gain access to systems. Even if you believe your team is savvy, phishing emails continue to trick businesses via emails that look legitimate — perhaps from a vendor, a payroll provider, or even someone inside your organization. The goal: click a link, download a file, share credentials.
What you can do:
Run regular phishing awareness campaigns and simulations for your team.
Use strong email filtering and monitoring.
Make sure you have a defined internal process for verifying requests (especially financial or data-sensitive).
Emphasize that detection isn’t the target—response is. It’s not about stopping every bad email, it’s about ensuring your team knows what to do when one lands.
2. Credential Stuffing
This attack type exploits the fact that many people reuse passwords across services. Attackers take credentials (username/password) stolen from one site and then use bots to automate login attempts across other platforms.
What you can do:
Enforce multi-factor authentication (MFA) across all critical systems — especially email, VPN, cloud platforms.
Use a password-management tool so employees can generate/store unique passwords rather than reuse them.
Monitor for anomalous login behavior (multiple login attempts from unexpected Geo-locations, unusual time-frames).
Consider periodic credential-testing (in a safe, controlled way) to simulate attacks and verify your defenses.
3. Business Email Compromise (BEC)
BEC attacks are more sophisticated than standard phishing. They usually involve an attacker gaining access to (or spoofing) an executive’s email account, then sending highly targeted and urgent messages to finance or HR staff requesting payments, wire transfers or sensitive data.
What you can do:
Augment your phishing training with BEC-specific scenarios.
Implement a multi-step verification process for any payment or banking changes: never rely on a single email approval. Use voice call, in-person confirmation or a second channel.
Monitor for anomalous email behavior: e.g., executive account sending out of the ordinary requests or second-factor usage from odd locations.
Maintain a clear chain of authority for finance/HR changes and train staff to recognize urgent payment requests as red flags.
4. Supply-Chain Compromise
Attackers are increasingly targeting third-party providers, software vendors, cloud services or IT-support firms as a way to gain indirect access to a business’s network. In short: even if your direct security is strong, if a vendor you rely upon is compromised, your business may be exposed.
What you can do:
Maintain an inventory of your key service providers/vendors.
Ask each vendor about their cybersecurity practices, data-handling and incident-response readiness.
Enforce MFA for all vendor access, and use least-privilege / need-to-know access controls.
Segment your network so vendor access touches only specific parts of your environment, limiting lateral movement in the event of a breach.
Monitor vendor activity and make sure you have contractual terms that require vendors to notify you of incidents in a timely fashion.
5. Ransomware
Ransomware continues to be a major threat: attackers gain access, encrypt data, restrict network access, and often exfiltrate sensitive files before demanding payment. Even where backups exist, exfiltration can complicate recovery.
What you can do:
Use a layered defense: endpoint detection & response (EDR) tools, vulnerability/patch management, frequent system backups (off-site and tested for restoration).
Ensure your backup strategy covers not just data-loss but also the ability to restore quickly and respond to exfiltration.
Conduct incident-response rehearsals: What if you are hit with ransomware right now? How do you restore systems, communicate with stakeholders, isolate damage?
Make sure you have the right people and processes in place before you need them — this is a business continuity priority, not just an IT issue.
Why Cyber Insurance Matters — And Why Compliance with Your Coverage Matters
Given the risks above, it’s clear that pure prevention alone isn’t sufficient for many SMBs. You need a robust cyber-resilience plan: prevention + detection + response + insurance.
Here’s why cyber insurance is critical:
Cyber insurance helps SMBs financially recover from an attack: covering legal fees, regulatory fines, business interruption, data recovery or incident response specialists.
It signals to customers, partners and vendors that you take cyber-risk seriously — and many contracts or regulations may increasingly expect this.
Because the risk landscape is constantly evolving, a policy helps shift some of the catastrophic financial burden of a cyber-incident away from your business.
Now, simply having a policy is not enough. You must understand your coverage terms and ensure your business is compliant with them. If you fail to meet the policy’s conditions, you risk having a claim denied.
What to watch for:
Minimum security requirements: Many insurers require certain controls (MFA, regular backups, vendor access controls, patching) in place for coverage to apply. If you don’t maintain them, you may nullify your protection.
Definition of covered events: Make sure you understand exactly what is (and is not) covered — e.g., does the policy cover exfiltration + encryption, or only one of those? Are social-engineering/fund‐transfer frauds covered?
Third-party/vendor exposure: If a vendor breach leads to your data being exposed, is the policy's third-party liability portion sufficient? Are your vendor practices aligned with what the insurer expects?
Incident-response obligations: Many policies expect you to follow a defined incident-response plan, engage approved vendors, or report incidents within a certain time-frame. Missing these steps may reduce your coverage eligibility.
Business interruption / downtime triggers: If your operations are disrupted, will the policy cover lost revenue or simply direct costs (e.g., forensic, legal)? Know the scope.
Policy limits / exclusions: Be aware of maximum payout limits, deductible/franchise structures, and any exclusions (e.g., acts of war, known vulnerabilities that you failed to patch).
Review annually / when major changes occur: If your business grows, changes systems, adds vendors, or changes how it handles data — your risk changes, and your policy may need updating.
How to align your business with your cyber-insurance policy
Conduct an internal security review (or bring in a third-party) and compare your controls to the insurer’s required baseline.
Document your cybersecurity practices: vendor access policies, MFA deployment, backup testing logs, employee training records, incident-response playbook.
Establish vendor risk management: ensure your vendors meet your standard and your insurer’s expectations; ensure your contracts let you enforce security requirements.
Train your team regularly — especially around phishing, BEC, vendor access and ransomware response.
Ensure your incident-response plan is up-to-date and practiced: who does what – who calls the insurer, who engages forensics, who handles communications, who contacts law enforcement/regulators.
Review your policy with your broker or advisor: ensure you understand triggers, coverage, exclusions, and how your business has to conduct itself to remain covered.
Monitor and maintain your security posture: keeping your safeguards up is part of getting and retaining coverage, and helps reduce your risk (which can lower premiums or avoid coverage refusal)
Final Thoughts
As a small/medium business, you may feel you don’t have as many resources as a large enterprise—but that does not mean you’re safe. In fact, attackers know SMBs often have weaker defenses. The five risk categories above (phishing, credential stuffing, BEC, supply-chain compromise, ransomware) are real and growing threats.
By weaving strong security controls plus a well-designed cyber-insurance policy into your business strategy, you create a true defense-in-depth posture. But remember: coverage without compliance is like having a fire extinguisher that’s not maintained — it may not work when you need it.
At Hudson, we recommend you treat cyber insurance not as a checkbox, but as one leg of your risk-management stool. You must:
Understand your risks
Build and maintain controls to mitigate them
Ensure your insurance policy fits your risk profile and that you remain compliant with its terms
Review annually (or whenever your business changes) to ensure alignment
If you’d like help assessing your cyber-risk posture, aligning your controls, or reviewing your insurance policy for compliance, we’d be glad to assist.
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