Nordea On Your Mind: Cybersecurity II
The increasing prevalence of cybercrime poses significant risks to corporations globally, a theme underscored in Nordea's recent report. Per the full note, global costs associated with cybercrime are estimated to hit USD 8 trillion annually, equating to about 20% of the S&P 500 market cap. This surge in costs is reflective of a wider trend where nearly 90% of the world's population is expected to have internet access by 2030, fueling opportunities for cybercriminals. As companies navigate this evolving threat landscape, we anticipate a growing demand for cybersecurity solutions, which could impact currency valuations linked to affected sectors.
What the desk is arguing
The thesis is clear: as cybercrime continues to escalate, corporate vulnerabilities will impact market dynamics, especially in sectors heavily reliant on digital operations. Per the full note, the societal shift towards digitization means businesses are more exposed to attacks, prompting the need for increased investment in cybersecurity measures.
Supporting evidence shows that global costs of cybercrime reached USD 8 trillion in 2022. This staggering figure underlines the urgent need for businesses to bolster their cybersecurity frameworks to protect operational integrity and customer trust. The escalation in cyber threats, particularly from organized crime and state-sponsored actors, amplifies the urgency for a proactive stance on resilience.
Where it sits in our coverage
Our current consensus target for related currency pairs is 1.075, with a range spanning from 1.04 to 1.12. Key firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view tends to align with jpmorgan, which sees a slightly more optimistic outlook, while bofa remains cautious at the lower end of the spectrum. The desk's call leans towards the higher end, reflecting a more bullish outlook on the demand for robust cybersecurity, particularly in the financial sectors affected by the broader trends in digitization.
How other firms see it
Firms like jpmorgan and goldman share a similar outlook, emphasizing the imperative for improved cybersecurity measures across sectors. In contrast, bofa holds a more conservative stance, anticipating slower progress in mitigating cyber risks.
Traders should also consider the impact of cybersecurity threats on pairs such as USD/JPY and EUR/USD as they reflect central bank policies influenced by corporate health and stability, both of which are sensitive to the ramifications of cyber threats.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Cybercrime costs soared to USD 8 trillion globally in 2022, highlighting market vulnerabilities.
- 02The shift towards increased digitalization invites greater risks, necessitating stronger corporate cybersecurity measures.
- 03Firm consensus continues to reflect a split between bullish and cautious outlooks on impacted currencies.
- 04Currency valuations may react to the implementation of enhanced cybersecurity strategies within corporations.
Market implications
Watch for movements in affected sectors as corporations ramp up cybersecurity investments, potentially impacting currency pairs like USD/JPY. Market reactions may intensify as firms release earnings reports reflecting the costs of cyber breaches.
Risks to this view
If major cyber incidents occur that disrupt key corporate operations, this could lead to sharp corrections in affected currency pairs and a reevaluation of cybersecurity measures. Additionally, shifts in regulatory frameworks governing cybersecurity could alter market sentiment and currency valuations.
Nordea On Your Mind Nordea On Your Mind: Cybersecurity II 16-05-2023 Did you know that global costs for cybercrime are estimated to have reached USD 8tn annually? Corporates are in the firing line, facing a range of threats from different types of cybercriminals. Our Nordea On Your Mind team return to the theme in their latest report, “Cybersecurity II.” Cybercriminals and cybercrime pose a bigger threat than ever before, both for corporates and individuals worldwide.
We are spending more of our time and conducting more business online, and crime is following us into cyberspace. Online life means online crime We are spending more of our personal and professional lives online. Almost 90% of the world's population is expected to have internet access by 2030, and 63% of it is already using smartphones.
This is fuelling rapid growth in cybercrime as criminals follow us online and exploit the fact that we are still less vigilant than required. Few of us would walk home alone from a party at night through an empty urban park, but when did you last change your login password at work? And how strong is it?
Global costs for cybercrime are estimated to have reached USD ~8tn in 2022. To get a sense of the harm done, consider that this corresponds to roughly 20% of the market cap for the S&P 500. NUMBER OF PEOPLE WORLDWIDE WHO USE THE INTERNET Source: Our world in data, ESentire, UN Multiple threats from different types of cybercriminals Hacktivists pursue an ideological agenda and can cause damage to corporates through denial-of-service attacks, website defacements, and data theft and leaks, even when their primary target is not a company as such.
Organised crime is in it for the money, often targeting corporates directly to carry out theft, fraud or extortion. State-sponsored players sometimes target corporates with specific aims but pose a great risk from big cyberattacks with the intent to cause harm to adversaries. Corporates can suffer major collateral damage in such instances, as was the case with the WannaCry and NotPetya cyberattacks in 2017.
NORDIC VS. EU INTERNET USAGE AS % OF POPULATION Source: Eurostat Corporates in the firing line Cyberattacks cause disruption for companies, and hence cost money. It typically takes a company 200 days to discover a data breach and another 70 days to contain it.
Next comes remedies, restoring and rebuilding systems with authorities and regulators in the loop, and lost business in the meantime. The global average cost of a data breach is USD 4.35m, roughly equivalent to 13,600 workdays. We review the attacks against Colonial Pipeline (national emergency with fuel shortages on the US East Coast, with a USD 4.4m ransom paid) and Kaseya (forced closure of Coop Sweden's stores for six days at a cost of possibly up to SEK 600m) in 2021 and against Norsk Hydro in 2019 (production disruption cost of NOK 800m) as examples of the major impact on companies and society.
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