The Cost of Cyber Attacks to the U.S. Economy
By Space Coast Daily // January 31, 2019
The U.S. is the largest economy globally representing 15.28% of the world’s Gross Domestic Product (GDP).
More specifically, the US has a GDP of $20.66 trillion growing at 3.5% annually. In contrast, the second largest economy is China with a GDP of $13.457 trillion.
The US outpaces other nations in other sectors as well. For example, the US dollar is the most traded currency worldwide. Several nations use it as their legal tender. The US is also the strongest nation in the world militarily and one of the most advanced nations scientifically.
Interestingly, the power and might of the US economy and military is insufficient when it comes to dealing with cyber-attacks. For example, over 668 data breaches occurred in the US in the first half of 2018.
These breaches exposed more than 22 million records. These attacks have a significant impact on the U.S. economy. More specifically, they interfere with confidence in business processes, movement of capital, and costs. Here is an overview of the cost of cyber-attacks to the US economy.
Interference with Confidence in Business Processes
Investing in a company, supplying goods to it, or working for it is difficult if you lack confidence in it. In most cases, you would prefer working with a firm that you trust with your money or information.
Cyber-attacks erode this trust significantly. For example, hackers calling themselves Guardians of Peace leaked confidential data from Sony Pictures. Sony Pictures is an American film company that has its headquarters in Culver City, California. It makes more than $9 billion annually.
This leak exposed personal information about employees who worked for Sony Pictures including private email exchanges. Several companies caved into the hackers’ demands by failing to screen a film that the hackers disliked. Sony Pictures canceled the films mainstream and premiere release.
The production budget for this film was $44 million while sales at the Box Office barely reached $12.3 million. That means Sony Pictures made a loss of $31.7 million. This loss was the result of frustrations that the hackers had put on Sony Pictures’ release of the film.
Sony Pictures’ partners did not feel confident enough about their cyber-security if they screened this film. Employees of Sony Pictures also have less faith in the company than they did before the hack occurred. That is an example of how devastating cyber-attacks are on the US economy.
Interference with the Movement of Financial Capital
The ease of moving capital is one of the most significant factors that propel an economy to prosperity. Remember, the United Kingdom became an economic giant in the 1600s because it developed a distinct and effective banking system.
The United States is not an exception. Currently, the US has twelve banks in the top 100 banks worldwide when measured by assets. The United Kingdom has six banks only on this list. The US also has the largest bank globally by market capitalization.
Unfortunately, hackers are wreaking havoc on the US financial system impeding the free flow of capital within the country. Currently, researchers estimate that a single cyber hack on a bank would cost the affected bank as much as $1.8 million.
That means banks will have less money to lend to the public than they did before the hack. It is worth noting that banks will shut down their systems as well so that they can deal with the hack. Consequently, the affected customers will not deposit or withdraw cash for some time.
The Cost of Preventing and Dealing with Cyber-Attacks
In 2016, CNBC reported that ten well-known US companies had moved their headquarters abroad. These companies included Burger King, Budweiser, and Lucky Strike. Most of them have moved their headquarters to countries with a low-cost environment such as Ireland.
Now a new cost is emerging in the business sector namely the cost of preventing and dealing with cyber-attacks. This cost places additional pressure on US companies as they try to compete nationally and globally.
It means that reinvesting in their businesses became difficult as hackers become more aggressive than they were. It means that firms have to match this increased aggressiveness with enhanced cyber-security.
Fortunately, businesses especially small medium enterprises can limit this emerging cost by investing in VPN. What is a VPN? Well, VPN is an acronym that stands for Virtual Private Network. This network creates an encrypted connection over insecure networks such as the internet.
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