Defining Material Cybersecurity Incidents

A Critical Step in Incident Disclosure

One of the most complex aspects of incident disclosure compliance is determining what qualifies as a material cybersecurity incident. Under the SEC’s cybersecurity disclosure rules, a material incident is one that is likely to influence an investor’s decision.

Materiality is often subjective, requiring organizations to establish internal criteria for assessing the significance of an incident.

Failing to properly define materiality can result in:

🚨 Regulatory violations – If a material incident is not disclosed, organizations may face SEC penalties.

🚨 Reputational damage – Inconsistent or delayed disclosures can erode stakeholder confidence.

🚨 Operational risks – Misjudging an incident’s materiality can lead to inadequate response and escalation.

To ensure accurate, timely, and compliant disclosures, organizations must develop clear internal thresholds for materiality based on operational, financial, legal, and reputational impact.