As Cybercrime Rises, So Does Spending On Cyber Security

The world is becoming increasingly connected through networks and data in an ecosystem governed by digital technologies which have created immense opportunities for individuals, businesses and organizations. The assimilation of mobile, IoT devices, cloud computing, and other high-tech solutions have changed the way people, businesses, organizations and governments connect and work.

While the interconnectivity of devices and use of sophisticated technologies is positively changing the world, it is increasingly being challenged by cybercrime, clearly reflected by the steep rise in the number of cyber-related frauds and crime reported in the recent years.

Cisco points out that, “Cybercriminals have refined their back-end infrastructures to carry out attacks in ways that increase efficiency and profits” and thus every industry, from financial services to entertainment, is vulnerable to such risks. In 2015, cybercrime ranked as the second most reported economic crime. Increasingly frequent and precision-based cyber-attacks call for a stronger fortification against them.

Cyber attacks can be categorized across various degrees. While some involve data breaches which exposes sensitive information like trade secrets, personal data, intellectual property, and other confidential information, others threats involve disabling software infrastructure, taking over systems, or denial of service.

The total number of cyber security incidents reported in 2009 were 3.4 million while the number increased to 59.1 million in 2015, as per a PwC global survey. “The U.S. Federal Reserve detected more than 50 cyber breaches between 2011 and 2015, with several incidents described internally as "espionage," according to Fed records” as reported by Reuters. A recently released report by MetricStream reveals that 66.2% of financial organizations faced at least one cybersecurity attack in the last year.

Popular retail houses such as Target and Home Depot have been victims of such activities resulting in loss of costumer data and credit card information. Not just companies, even individuals are prone to risk with an estimated an “estimated 556 million people falling victim to cybercrime annually” which translates to 12 people every second. These figures perhaps don’t reflect the exact situation as many cybercrime incidents either go unreported or undetected for a long time.

Cyber attacks don't just result in losses of money or data, they also dent the reputation of the entity affected by the attack, culminating in the loss of trust among suppliers and customers. Attacks can also trigger regulatory or legality proceedings, negligence claims, and can lead to the loss of productivity and competitiveness, especially in cases of industry espionage which often go undetected. It is predicted that globally, cybercrime costs will touch $6 trillion annually by 2021, from $3 trillion in 2015.

The race among the cyber criminals and cyber security providers is a tough and a challenging one. It is unbelievable how a computer node in part of the world can actually play mischief with bank accounts or get control of a company’s sensitive data, which may be in another part of the world.

Given the growing incidence and sophistication of cyber-attacks, corporations and governments have increased allocations towards combating cybercrime. In fact, many have even resorted to insurance coverage for cyber liability. It is estimated that the cyber insurance market could grow to $5 billion by 2018 in annual premium and to at least $7.5 billion by 2020.

The global spending on cybersecurity products and services for defending against cybercrime is projected to exceed $1 trillion cumulatively over the next five years, from 2017 to 2021 as per the estimates of Cybersecurity Ventures.

In the U.S., President Obama laid great emphasis on cybersecurity as he identified it “as the most serious economic and national security challenge.” According to the Cybersecurity National Action Plan (CNAP), the U.S. administration announced an investment of over $19 billion for cybersecurity as part of the President’s Fiscal Year (FY) 2017 Budget, representing a more than 35% increase from FY 2016 in overall Federal resources for cybersecurity.

Microsoft estimates that by 2020, 4 billion people will be online, 50 billion devices will be connected and data volume will be 50 times great than it is today. It is also estimated that about 75% of infrastructure will be controlled by third party cloud or internet service providers. Thus, “As we look to the future, the explosion of connected devices and data flows are making it even more challenging to protect against advanced targeted attacks.”

While this is a challenging situation, there lies great opportunity for companies operating in the field of cyber security, as they witness an increased demand for products which empower companies and institutions to fight the menace of cybercrime.

International Business Machines Corporation (IBM), Cisco Systems, Inc. (CSCO), Palo Alto Networks, Inc. (PANW), root9B Technologies Limited (RTNB), Fortinet, Inc. (FTNT), Check Point Software Technologies Limited (CHKP), FireEye, Inc. (FEYE), Gigamon, Inc. (GIMO) and Symantec Corporation (SYMC) are some of the listed companies in the U.S. working actively on cyber security solutions. The increased competiveness within the space and the challenges thrown by hackers and cybercriminals are compelling these companies to stay ahead of the dark shadows looking to cast their spell.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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