Cyber attacks are a growing problem for individuals, businesses and governments alike. Still, many ask the question, “Why is cybersecurity important?”
For starters, the proliferation of cyber attacks is increasingly causing damage to diverse entities. No organization or industry is safe from cyber threats, but the most targeted include the healthcare, financial services, energy and pharmaceutical industries.
The Equifax (NYSE:EFX) cyber attack that happened in July 2017 is one example — the hack allowed access to the personal and financial information of almost 150 million people. In July 2019, Equifax settled with regulators for US$700 million.
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There were plenty of malicious attacks in cyberspace to go around in 2018 and 2019 as well. These included attacks on Apple (NASDAQ:AAPL), Capital One (NYSE:COF), Facebook (NASDAQ:FB), Marriott (NASDAQ:MAR), Under Armour (NYSE:UAA), Toyota (NYSE:TM), Saks Fifth Avenue and Lord & Taylor.
In mid-2020, Twitter (NYSE:TWTR) announced a cybersecurity breach of the official accounts of high-profile billionaires (e.g. Elon Musk, Bill Gates), celebrities (e.g. Kanye West, Kim Kardashian) and government leaders (e.g. Joe Biden, Barack Obama). Their accounts were targeted by hackers who sent out tweets to lure followers into a bitcoin scam.
Cybersecurity is becoming even more critical for protecting essential infrastructure. As has been seen in 2021, cyber criminals are increasingly targeting physical infrastructure such as pipelines, energy grids, water distribution lines and food-processing plants. One key example is a US$4.5 million ransomware cyberattack in May that shut down the Colonial Pipeline, the largest fuel pipeline in the US.
In 2018, Trump’s chief of homeland security called cybersecurity the country’s biggest national threat. That same year, the president released a defense policy bill that addresses cybersecurity and calls for stronger measures against cyberthreats.
Government agencies and businesses need to respond to these threats by adopting strict security measures. This article breaks down the three main answers to the question, “Why is cybersecurity important?” and illustrates why this market is ripe with opportunity for investors.
1. Why is cybersecurity important? Increasing threats
As noted, the number of security incidents is increasing every year, and this comes with a heavy price tag. According to a 2020 research report by IBM (NYSE:IBM), a single data breach event could cost an organization US$3.86 million.
The report also shows that the monetary impact of a cybersecurity attack can be mitigated with the right cybersecurity measures in place. According to IBM, fully deployed cybersecurity technologies — such as artificial intelligence (AI), analytics and automated orchestration — can reduce data breach costs to an average of US$2.45 million per event. Having absolutely no cybersecurity technology in place, however, can cost an organization upwards of US$6.03 million per event.
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“A data breach can have far-reaching consequences, causing financial losses and affecting an organization’s operations and compliance in the short term,” states IBM on its website. “And a major breach in the headlines can potentially damage reputation for years to come, leading to lost business and a competitive disadvantage.”
Moving forward, Cybersecurity Ventures expects cybercrime to inflict US$6 trillion in damages globally in 2021. The firm forecasts that global cybercrime costs will grow by 15 percent year-over-year for the next five years to reach US$10.5 trillion annually by 2025.
“Cyber threats have expanded from targeting and harming computers, networks, and smartphones — to people, cars, railways, planes, power grids and anything with a heartbeat or an electronic pulse,” explained Cybercrime Magazine Editor-in-Chief Steve Morgan. “Many of these Things are connected to corporate networks in some fashion, further complicating cybersecurity.”
What investors might not know is that mobile devices are faced with rising security threats, as are medical devices. In fact, the healthcare industry is expected to spend US$125 billion on cybersecurity between 2020 and 2025.
2. Why is cybersecurity important? Severity of attacks
It isn’t just the number of cybersecurity attacks that is increasing. Their severity is on the rise as well.
The cyberattack on the Colonial Pipeline forced the Georgia-based company to shut down its IT and pipeline operations. To understand the severity of this impact, consider that Colonial is responsible for providing 45 percent of the fuel for the east coast of the US, including gasoline, diesel, jet fuel and home heating oil, as well as fuel supplies to the US military. The attack disrupted supplies for several days, leading to fuel shortages and price hikes at the pump.
Colonial CEO Joseph Blount admitted the company paid a US$4.4 million ransom in bitcoin to the hackers. The US Department of Justice said the government was able to recover about US$2.3 million.
The BBC reported that while the pipeline was back online within days, it was nearly a month before seven finance systems used by the Colonial Pipeline were restored.
A single cyberattack can wreak a lot of havoc considering that according to IBM, it can take an average of 207 days to identify a security breach, and another 280 days to fully contain it.
Soon after the pipeline cybersecurity breach, another ransomware attack struck important industry infrastructure. This time, the target was global meat-processor JBS, which accounts for more than one-fifth of US domestic beef supply. The Brazil-headquartered company was forced to curb activity at all its US beef plants; the attack reverberated through the company’s networks in the country and through its businesses in other countries, as per the Guardian.
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These two major back-to-back cybersecurity attacks, one on a major US gas pipeline and the other on a major meat processor, show just how dangerous cyber threats can be.
“I think the takeaway is that if you are a corporate executive or a local government head and you thought that you would be spared, guess what? They went after your gas, they went after your hotdogs, no one is out of bounds here. Everyone is in play in every single corporation,” Christopher Krebs of the US Cybersecurity and Infrastructure Security Agency said on NBC’s Today Show in early June.
3. Why is cybersecurity important? Future outlook
Looking ahead, PwC sees five major cyber threat trends for 2021 and beyond. Topping the list is, of course, ransomware, followed by phishing emails and texts that makes use of current affairs, supply chain attacks and social engineering. However, hope is on the horizon with the fifth trend on the list being the “rise of the defenders.”
“Public sector entities, legislative branches and private sector organisations have been sharpening their cyber strategies and coordinating efforts to tackle malicious cyber activity,” notes PwC.
This is also a positive trend for investors interested in the cybersecurity sector. Government officials and corporate executives are no longer asking, “Why is cybersecurity important?” — they recognize that it’s an area worthy of commitment and are taking preventative action against threats.
Grand View Research states that the global cybersecurity market will grow at a compound annual growth rate of 10.9 percent between 2020 and 2028 to reach US$372.04 billion.
“An increase in the number and intensity of data breaches across enterprise networks is driving the adoption of cyber security solutions and services globally,” the firm’s analysts said.
Next time someone asks you, “Why is cybersecurity important?” you’ll have more ideas to share.
This is an updated version of an article originally published by the Investing News Network in 2015.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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