This article outlines five risk areas worth understanding before and during AI integration in your business. None of these should put you off using AI. But knowing what to look for helps you make smarter decisions and avoid being caught off guard.

Here are five risks to consider when integrating AI tools into your business.

Five AI Risks Every Business Owner Should Know

1. You’re Only as Secure as the Tools You Rely On

When you use a third-party AI solution, you’re not just buying a product. You’re taking on a dependency. If that vendor’s platform goes down, gets hacked, or changes its terms, your business feels it too.

It is sometimes called software supply chain risk, and AI tools have introduced new versions of that risk.

Consider what happened in late 2022, when a popular machine learning library called PyTorch was compromised through a supply chain attack. A malicious package was uploaded to a public code repository under the same name as a legitimate dependency. Before it was caught, it had been downloaded approximately 2,300 to 3,000 times, with each download capable of silently harvesting credentials and sensitive files from the affected machine.

More visibly, ChatGPT (used by millions of businesses globally) experienced multiple significant outages across 2023 and 2024, including a March 2023 incident where a bug in a third-party library briefly exposed fragments of other users’ chat histories, and a December 2024 outage lasting around nine hours following a power failure at a Microsoft data centre.

What this means for your insurance position: Dependence on third-party AI platforms is a risk exposure. When you speak with your insurance adviser, it’s worth discussing how your policy responds to losses caused by a vendor outage or compromise, rather than a direct attack on your own systems.

2. AI Tools Can Become Entry Points for Attack

Any AI tool that sends and receives information (a chatbot on your website, an AI calculator, an automated assistant) creates a channel that can, in some cases, be manipulated.

One technique is known as jailbreaking: prompting an AI model to behave outside its intended parameters. This isn’t always a dramatic hack. Sometimes it’s as simple as a customer asking questions in an unexpected sequence that lead to responses the business did not authorise.

The consequences can range from the embarrassing to the legally significant. In a case decided by the British Columbia Civil Resolution Tribunal in February 2024 (Moffatt v Air Canada [2024 BCCRT 149]), a passenger successfully claimed damages after Air Canada’s website chatbot gave him incorrect information about bereavement fares. The tribunal found Air Canada responsible for the chatbot’s output. The argument that the chatbot was a “separate entity” whose errors Air Canada couldn’t be held liable for was rejected outright.

The practical takeaway isn’t that chatbots are dangerous. It’s that businesses are responsible for the information their AI tools provide. If your AI tool gives a customer incorrect pricing, policy terms, or advice, the fact that a machine said it is unlikely to be a defence.

What this means for your insurance position: Liability for what your AI tools say or do can land with your business, not the vendor. That’s worth understanding when reviewing your professional indemnity and public liability cover.

1. Regulatory Enforcement

Australian regulators, including the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC), now actively oversee cyber risk management. When organisations experience serious data breaches, regulators may impose capital requirements, enforcement action, or public statements requiring remediation.

In 2026, regulatory expectations around cyber governance are higher than ever. APRA and ASIC expect organisations holding financial or personal information to have:

• Board-level accountability for cyber risk
• Documented incident response plans
• Regular cyber risk assessments
• Evidence of adequate security controls

Regulators view cyber risk as a business continuity issue. If your systems go down due to a cyberattack, your ability to serve customers is directly affected. Compliance with regulatory cyber expectations is no longer optional; it’s expected practice.

2. Financial Impact of Cyber Incidents

Data breaches are common and costly. In 2025, Australian organisations reported over 1,200 data breaches to regulators; the highest number since mandatory notification began in 2018.

The financial impact varies significantly by organisation size and incident severity:

• Small businesses typically face incident costs around $56,600
• Medium and large organisations in serious incidents face costs of $180,000 to $400,000+
• Very serious incidents can exceed $400,000

These costs include forensic investigation, system restoration, notifying affected individuals, regulatory investigation responses, and business interruption during recovery. Many businesses do not recover from incidents of this magnitude.

3. Reputational Risk

A cyber incident affects more than systems; it affects trust. Customers, suppliers, and stakeholders expect your business to protect their data and maintain system availability. When a breach occurs, the reputational damage can take years to rebuild.

The damage extends beyond immediate customer loss. Long-term impacts include loss of competitive advantage, difficulty attracting talented employees, and damage to supplier relationships.

4. Legal and Regulatory Liability

When personal information is exposed, individuals and regulators may take legal action. Claims may arise under:

• Privacy law (if you fail to protect personal information as required)
• Contract law (if supply chain partners or customers claim damages)
• Negligence law (if affected parties claim you failed in your duty of care)

Additionally, under Australia’s Privacy Act, if you experience a data breach likely to cause “serious harm,” you must notify the Office of the Australian Information Commissioner and affected individuals within 30 days of assessment. Failure to comply can result in civil penalties.

Managing Cyber Risk: Prevention and Insurance

Managing cyber risk involves two complementary approaches: prevention and financial protection through insurance.

Prevention and Governance

Organisations typically manage cyber risk through security practices, staff training, regular system updates, incident response planning, and governance frameworks. These are best developed in consultation with your IT security adviser or IT service provider, who can assess your specific operational risks and recommend appropriate controls.

Insurers assess whether organisations have basic security measures in place. They expect to see evidence of multi-factor authentication, regular backups, endpoint detection on critical systems, and documented incident response plans. Strong security practices often result in better insurance terms and lower premiums.

However, even well-protected organisations can experience breaches through human error, novel attack methods, or supply chain compromise. Prevention alone cannot eliminate cyber risk entirely.

Financial Protection Through Insurance

This is where cyber insurance plays a critical role. Cyber insurance transfers the financial impact of cyber incidents from your business to an insurer. It covers costs that prevention cannot avoid:

• Forensic investigation and incident response
• Notifying affected individuals and credit monitoring services
• System restoration and data recovery
• Business interruption (lost revenue during downtime)
• Legal defence and regulatory investigation costs
• Potential damages or settlements

Combined with strong prevention practices, cyber insurance is an essential part of managing cyber risk in 2026. For comprehensive details on cyber insurance coverage, claims process, and how policies respond to data breaches and business interruption, see our Cyber Insurance Guide.

Next Steps

If you’d like to understand your cyber risk exposure and explore insurance options, Clear Insurance can help. We conduct risk and insurance reviews that assess your cyber exposure and recommend appropriate coverage limits and policy terms.

If you’d like advice or a no-obligation risk and insurance review tailored to your business, contact Clear Insurance on 1300 721 132 or email info@clearinsurance.com.au.

Last updated: 26 August 2026

The Ransomware Threat

Ransomware attacks are targeting Australian organisations at an accelerating rate. Key facts:

• Ransomware attacks are occurring every 6 minutes globally, with Australian organisations increasingly targeted
• Average incident costs for small businesses are around $56,600; serious incidents can exceed $180,000 to $400,000+
• Business email compromise (where attackers impersonate colleagues or suppliers) accounts for 58% of cyber insurance claims globally
• Since 30 May 2025, organisations with annual turnover over $3 million must report ransomware payments to the Australian Signals Directorate within 72 hours

Importantly, many business leaders believe their data is safe because it’s stored in the cloud or managed by an IT service provider. However, ransomware typically enters organisations through phishing emails containing genuine-looking links or attachments sent directly to staff. Criminals often impersonate trusted colleagues, familiar website domains, or known suppliers, making it easy for staff to be caught off-guard.

5 Ways to Reduce Ransomware Risk

1. Implement Core Device Protection

Organisations typically implement security software including antivirus protection, firewalls, spam filters, and regular security patches kept up to date. Equally important are regular data backups with copies stored securely offline, separate from production systems.

Insurers assess whether organisations have these basic controls in place when underwriting cyber policies. Strong implementation often results in better insurance terms.

2. Staff Awareness and Phishing Training

Employees can inadvertently expose organisations to ransomware by clicking suspicious links or opening attachments that appear genuine. Many organisations conduct phishing awareness training for all staff, with annual refreshers to keep cyber security front of mind.

Practical training should cover what phishing emails and ransomware look like, their impact, and what staff should do if they receive suspicious emails. Early reporting of suspicious activity is critical; the sooner a breach is detected, the faster and less expensive it is to resolve.

Your IT security adviser or managed service provider can recommend appropriate training programs suited to your organisation’s specific risks.

3. Use Real-World Examples to Train Staff

One of the most effective training approaches is showing staff real examples of phishing emails or ransomware warnings they might encounter. This helps team members recognise warning signs and understand what to do if they receive a suspicious email.

Importantly, staff should feel comfortable reporting suspected breaches without fear. Early reporting significantly reduces the time and cost of incident response.

Real-World Case Study:

An employee clicked a link in an email and found a ransom note on their screen. Four of the company’s systems were encrypted, and attackers demanded payment. After negotiation, the encryption password was provided, but the company had to rebuild their entire IT infrastructure due to the breach.

Insurance Outcome: The company had cyber insurance. The total claim was $146,000, covering:

• Ransom fee: $17,000
• Cyber response and investigation costs: $18,000
• Business interruption payout: $111,000

(Real-world claim example from Emergence)

Without cyber insurance, this organisation would have faced the full $146,000 cost plus ongoing reputational damage and potential regulatory investigation.

4. Encourage Staff Feedback on Internal Systems

If company systems are too restrictive or slow, employees may bypass security controls, download unapproved applications, or use less secure workarounds. This can inadvertently introduce vulnerabilities.

Creating safe channels for staff to provide feedback on system usability helps IT teams find solutions that balance security with practicality.

5. Review Your Cyber Insurance Cover

Ransomware incidents can generate costs that exceed many organisations’ budgets. With incident costs rising annually, it’s worth reviewing your cyber insurance cover to ensure you have adequate protection.

Cyber insurance often sits outside standard business insurance policies and must be purchased separately. Coverage typically includes:

• Forensic investigation and incident response costs
• Ransom negotiation and, in some cases, ransom payment (subject to policy terms and regulatory requirements)
• System restoration and data recovery
• Business interruption (lost revenue during downtime)
• Notification and credit monitoring services for affected individuals
• Legal defence and regulatory investigation costs

For comprehensive details on ransomware coverage, claims process, and how cyber policies respond to incidents, see our Cyber Insurance Guide.

Next Steps

If you’d like to review your cyber insurance cover or discuss ransomware risk with an adviser, contact Clear Insurance on 1300 721 132, email info@clearinsurance.com.au or complete our online enquiry form. We can assess your current coverage and help ensure you have appropriate protection for your business.

Last updated: 27 August 2026

We can always learn from the past, so let’s take a look at some of history’s biggest cyber attacks:

1. The Melissa Virus

2. NASA Cyber Attack

3. The 2007 Estonia Cyber Attack

4. A Cyber Attack on Sony’s PlayStation Network

5. Adobe Cyber Attack

6. The 2014 Cyber Attack on Yahoo

7. Ukraine’s Power Grid Attack

8. 2017 WannaCry Ransomware Cyber Attack

9. A Cyber Attack on Marriott Hotels 

10. The biggest password leak yet

If you would like to discuss your insurance program with an experienced adviser, you can contact Clear Insurance on 1300 721 132 or complete our online enquiry form.

These incidents demonstrate why cyber insurance is essential. For details on how insurance covers incident response, recovery costs, and business interruption, see our Cyber Insurance Guide.

Ransomware Attacks

The world’s largest meat processing company, JBS Foods, has fallen victim to cyber attacks that have shut down production around the world, including in Australia.

JBS has 47 facilities across Australia and operates the largest network of production facilities and feedlots in the country. The company also has a meat processing facilities in North and South America, Brazil and Canada. Thousands of meat-workers across Australia have been sent home as a result of the recent cyber attacks, according to the Australian Meat Industry Employees’ Union.

The company’s information systems were the main target of the cyberattack which sent the organisation into chaos globally. The five-day shutdown threatened Australia’s meat supply chain, with temporary staff lay-offs at some of the company’s plants and reports from farmers that their shipments of livestock were cancelled.

In a statement, a JBS spokesperson said the company took immediate action by contacting authorities and enlisting the help of IT experts across the globe to help fix the issue.

“All of the animals coming into the system, and all the meat going out of the system are all done by computers, whereas in the old days it was done with the labelling and tagging system,” Tasmanian Secretary Andrew Foden said.

The situation is also having big implications for farmers elsewhere in the country. Gabrielle Coupland farms on the southern NSW border and delivers sheep to the JBS plant at Brooklyn just outside of Melbourne. She said deliveries were cancelled on Monday and the shutdown had caused huge disruption to the supply chain in the region.

Federal Agriculture Minister David Littleproud confirmed the government was investigating the hack and working to get the company back online.

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At the time of publishing it has been confirmed that JBS paid the equivalent of $US11 million ($14.2 million) to a criminal gang to end a five-day cyber attack that halted its operations around the world, including Australia. The company said it paid the money to mitigate any unforeseen issues related to the attack and ensure no data was exfiltrated. The ransom was paid in bitcoin.

If you would like to discuss your insurance program with an experienced adviser, you can call Clear Insurance on 1300 721 132 or complete our online enquiry form and an adviser will be in touch.

We’ve all been there. Packed car parks, long queues, pushy crowds. If you want to avoid the stress and mayhem of your local shopping centre, online shopping has considerable upsides. The only trouble is, there are plenty of scammers waiting to take advantage of online shoppers.

There’s also the potentially expensive issue of getting stuck with online purchases that fail to meet your expectations, are dangerous and/or illegal, or perhaps don’t even work.

To ensure you and your family don’t fall prey to scammers, here are some things to keep in mind.

1. Shop only on secure websites

Clearly some websites are a lot easier to identify as being secure than others. However all secure websites will have two key markers:

1. An image of a closed padlock – this is usually located in the top left of your browser URL
2. A web address that begins with ‘https://’ – if the URL leaves out the ‘s’ and begins only with ‘http://’ be very careful.

For a website to be truly secure, it must have both of these important markers. If you can’t see them, never give out personal information such as your credit card details, account numbers or passwords.

2. Only provide relevant information

Is a website asking you for personal information that doesn’t seem relevant to your purchase? If so, there’s good reason to be suspicious about continuing. It might sound tedious, but it’s also worth taking a look at the website’s privacy policy and making sure you’re cool with its stipulations.

3. Keep records & keep checking them

It may seem a little unnecessary. But be sure to always take note of any reference numbers associated with your purchases and either print or take screen shots of your receipts. If you don’t receive either of these things at the time of purchase, follow up with the business concerned immediately. A day or two later it’s also excellent online protocol to check the receipt against the amount that is actually charged to your credit card or debited from your account to make sure they match.

4. Employ a healthy dose of digital suspicion

You’d be amazed just how sophisticated scammers have become and the incredible lengths they’ll often go to in pursuit of their illegal gains. While it can be very difficult to tell some online scams from legitimate business offers, it pays to keep your wits about you at all times and employ a healthy dose of digital suspicion. As they say, if it seems too good to be true it probably is.

To help, scamwatch.gov.au is a great resource for staying up-to-date with the latest online scams to watch out for.

5. Shop only with reputable businesses

True, just because you’ve never heard of a business before doesn’t mean it’s bogus. But until you’re confident it isn’t, be careful. How can you tell if a business is reputable? Some of the better indicators include:

• You’ve heard of the business
• It’s been trading for some time
• Independent online reviews are positive, especially from other sites and sources you trust
• You or someone you know has used them in the past with no problems
• The company has an actual office including a listed physical street address (i.e. not just a PO Box).

6. Check the terms & conditions

One of the biggest downsides of shopping online happens when something goes wrong. For example, what if the product you buy turns out to be faulty? Breaks in transit? Doesn’t fit? Isn’t what you ordered? Or maybe doesn’t even arrive at all? It’s often far more complicated than shopping in the real-word, so before making an online purchase make sure you understand the seller’s terms and conditions. Be particularly aware of the processes/costs for returning an item and how to go about getting a refund should you need one. As they say, buyer beware.

7. Watch out for hidden costs

There are plenty of bargains to be found online. But always be careful to look beyond the purchase price alone. While the actual product might seem cheap, hidden charges like shipping and postage fees, import taxes, service fees and currency conversion rates if you’re shopping overseas can add up fast. In some cases you may find it’s much cheaper to buy from a local shop after all.

8. Be careful if you’re buying from an overseas site

When you shop with an overseas website you’re largely on your own. You’re unlikely to be protected by Australia’s consumer laws, so in order to protect yourself there are plenty of questions to consider.

• Is the product legal in Australia?
• Will the manufacturer’s warranties apply in this country?
• Does it meet current Australian safety standards?
• Do you need an import permit to bring it into the country?
• Will any import taxes apply when it arrives?

If you’re unsure, especially if the value of the product you’re buying is quite significant, it’s an excellent idea to double check long before you click on the ‘BUY NOW’ button. For questions relating to the importing of goods visit www.border.gov.au.

If you would like to discuss your insurance program with an experienced adviser, you can call Clear Insurance on 1300 721 132 or complete our online enquiry form and an adviser will be in touch.