Web Server Access to Files and Configuration Directories

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Trying to switch hosting providers. I tried to simply move the content over, but had some trouble so I opted for the clean install.

Got this message: Web Server Access to Files and Configuration Directories (Says I need to change permissions for \files \config and \packages)

Only permission set that worked was 777.

Is this by design?
Does this pose a risk allowing the public to write to these files?

Thanks all