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Cybersecurity in IPO Readiness: Why It’s Critical for Public Market Success

Considering an initial public offering (IPO)? The list of tasks that need to be considered, prepared, and implemented can be daunting. One critical area often overlooked from that list is cybersecurity. Failing to integrate cybersecurity into the IPO readiness process can expose companies to many fallouts, including regulatory scrutiny, valuation erosion, and reputational damage, sometimes before the bell even rings.

Going public places a company under intense scrutiny from regulators, investors, underwriters, auditors, other stakeholders, and even the public eye. Companies must juggle several competing priorities to maintain their integrity and good standing through a successful IPO. In today’s digital environment, cybersecurity is no longer just an operational consideration; it’s a board-level concern that directly impacts enterprise value.

Cybersecurity matters that a company and its stakeholders must consider when starting the IPO journey include:

1. Institutional investors increasingly demand transparency around cyber risk. A robust cybersecurity posture signals maturity, resilience, and long-term viability.
2. The SEC has heightened its focus on cybersecurity disclosures, requiring companies to demonstrate their understanding and mitigation of cyber risks and to have governance structures in place to direct them.
3. A data breach (even a minor one) has proven to derail IPO momentum. Cyber incidents can lead to delayed filings, increased insurance premiums, and reduced market confidence.
4. Underwriters and legal teams now include cybersecurity in their due diligence procedures as a high-risk area. Gaps in cyber hygiene or compliance tend to lead to uncomfortable questions or even transaction re-evaluation.

The Risks of Skipping Cybersecurity in IPO Preparation

Neglecting cybersecurity in IPO readiness isn’t just an oversight; it’s a strategic misstep that could derail the entire transaction. Newly public companies become prime targets for cyberattacks. Without a preemptive risk assessment, they may lack the capabilities to withstand this exposure. Inadequate or misleading cyber disclosures can lead to regulatory penalties or shareholder lawsuits, especially if a breach occurs post-IPO.

The market is unforgiving. A data breach close to or after IPO can permanently tarnish a brand’s reputation and investor trust. To mitigate these risks, companies should conduct a comprehensive cybersecurity review as part of IPO readiness. Key components include:

• Perform a comprehensive cybersecurity risk assessment to identify critical gaps and determine a mitigation plan.
• Create a comprehensive inventory to identify and prioritize IT assets.
• Assess board oversight and executive accountability.
• Ensure adequate crisis management practices are in place to address any events that, if an organization is unprepared for, will typically lead to disastrous fallout.
• Implement third-party and supply chain management programs to evaluate vendor and partner exposures.
• Execute vulnerability scans and penetration tests to identify critical weaknesses within the environment.
• Know your regulatory requirements based on industry and other company-related variables. This may involve aligning cyber risk disclosures with SEC expectations and designing IT General Controls that will withstand the rigor of SOX compliance.

Conclusion

Companies that proactively integrate cybersecurity matters into their IPO readiness plan will gain a competitive edge. They provide a signal to the market that they are resilient, well-governed, and prepared for the scrutiny of public company life. Cybersecurity is no longer just a compliance check-the-box exercise; it’s a strategic enabler of IPO success. Companies that proactively assess and address cyber risks signal to the market that they are not only ready to go public, but also prepared to thrive in a complex, high-stakes environment.

How Centri Can Help

Centri’s cybersecurity and IPO readiness services are designed to help companies navigate the complexities of going public with confidence and clarity. Our team of experts understands the intersection of cybersecurity, regulatory compliance, and investor expectations—ensuring that your organization is not only protected but also positioned for long-term success. Contact us to learn how we can help your company meet the demands of the public markets while safeguarding your digital integrity.

Derek Kearns

Partner | SEC, Financial Reporting & SPAC Practice Leader | CPA

Derek is a Partner at Centri Business Consulting and the leader of the firm’s SEC, Financial Reporting, & SPAC Practice. He has more than 23 years of accounting experience in both public and private industries. View Derek Kearns's Full Bio

Rich Sowalsky

Managing Director | IT Risk & Cybersecurity Practice Leader | CISA

Rich is a Managing Director at Centri Business Consulting and the leader of the firm’s IT Risk & Cybersecurity Practice. He has more than 16 years of combined experience in internal control consulting, IT risk, cybersecurity advisory, and risk-based internal audits and accounting. View Rich Sowalsky's Full Bio

Karyn DiMassa

Managing Director | CPA, PMP, CISA, CFE

Karyn is a Managing Director in the IT Risk & Cybersecurity Practice at Centri Business Consulting. She has more than 15 years of combined experience in internal IT audit and external audit support (IT controls), third-party assurance (SOC 1 and SOC 2 reporting), internal controls consulting, project management, IT risk and cybersecurity, and system implementation support. View Karyn DiMassa's Full Bio