An increase in cyber attacks and ransomware hacks since the onset of pandemic lockdowns is alarming for a financial world headed headlong towards digital money and longer-term remote working.
The flip side of the digital revolution has always been the inevitable rise of its online crime alter ego – mimicking the much-vaunted global reach and potential anonymity of the web and eliminating lax security for businesses and consumers.
Some abusers are clearly suspected of being state sponsored, with political motives. But others are just super sophisticated organized gangs like DarkSide.
If the digitization of the global economy is inevitable, its security will be paramount.
The boom in remote working during the pandemic has seen an increase in such cyber raids and disruption to businesses, banks and government agencies. Victims just last month include Colonial Pipeline, Brazilian meat processor JBS and the Irish National Health Service.
Ransomware criminals raised nearly $ 350 million last year, three times more than in 2019, according to members of a public-private group called the Ransomware Task Force.
It sounds like a modest total in global terms, but the disruption caused by the loss of businesses or utilities and massive spending on cybersecurity defenses will be many multiples of that. According to U.S. government estimates, the bill for attacks like WannaCry in 2017, blamed on North Korea and targeting hospitals and banks around the world, is in the billions of dollars.
Citing various sources in the tech industry, rating firm Fitch estimates that ransomware attacks in particular have jumped nearly 500% in 2020 – with a quarter of all cyber incidents at legal and financial firms and with global costs. estimated at $ 20 billion. Even before the pandemic hit, the World Economic Forum (WEF) estimated the scale of disruption caused by cybercrime of all types to be in the billions of dollars.
WEF’s annual risk report this year ranked ‘cybersecurity failure’ in the top 10 global risks ‘by probability’ – along with ‘extreme weather’ and ‘climate action failure’ the first two. And nearly 40% of its members saw cyber risks as a “clear and present danger” to the global economy over the next two years.
The Center for Strategic and International Studies in Washington, meanwhile, documented more than 100 cross-border cyberattacks against governments and businesses around the world last year alone.
DIFFERENT TYPES OF VIRUSES
But sole proprietorship risk and data loss are different from fears of savings or stolen lifetime investments.
Rating firm S&P Global said banks are key targets as direct sources of funding, due to their key role in infrastructure and also their possession of a wide range of sensitive personal data.
“Accelerated digitization and remote working arrangements have increased the financial sector’s exposure to cyber risks and could lead to more complex cyber attacks that trigger higher losses,” he said, citing poor governance as the high vulnerability and mid-sized US banks with annual revenues of between $ 10 billion and $ 50 billion as the most targeted.
The scale of this problem is clearly multiplying as fast as the digital world itself – and similarly catalyzed by the pandemic.
But the added threat to finance is a huge problem as central banks and governments turn to digital currency, in part attempting to reclaim the digital currency world from cryptocurrencies that have already proven to be prone to hacking and organized crime.
The planned deployment of central bank digital currencies (CBDCs) as legal tender over the next few years dramatically raises the stakes for securing fresh money. China is already piloting the digital yuan and the European Central Bank said on Thursday that it would decide next month on the green light for the cyber-euro.
“The increased number of central bank touchpoints in the economy and the danger of hackers usurping the role of central banks in money creation means that the deployment of CBDCs will increase cybersecurity risks,” analysts wrote. Fitch Monsur Hussain and Duncan Innes-Ker last month.
The flip side of this huge potential risk to tens of trillions of dollars of CBDCs replacing physical cash around the world is simply growing centralized spending on cybersecurity and innovation to keep them safe.
And it is this trend that some asset managers have already identified.
“Cybersecurity will be key to activating ‘The Next Big Thing’ themes,” wrote Mark Haefele, chief investment officer of UBS Global Wealth Management last week.
UBS said the size of the global cybersecurity market was around $ 148 billion last year, with annual growth of around 8% in recent years and is expected to reach at least 10%. And it fits neatly into portfolios as a “defensive” stance in the expensive tech sector, he added.
If the digitization of the global economy is inevitable, its security will be paramount. This virus risk may not yet match the disruption of COVID-19, but investing in equivalent cyber vaccines can still be lucrative.
(Mike Dolan, Twitter: @reutersMikeD Edited by Mark Potter. The author is editor-in-chief for finance and markets at Reuters News. All opinions expressed here are his own)
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