Markets

What a major cyber-attack could mean for markets

Maurice Erlean / Unsplash
Maurice Erlean / Unsplash

The geopolitical risks that tend to have the greatest market impact? We find it's the ones that investors aren't focused on. One risk that falls into that category, according to our analysis: the risk of a major cyber-attack. Cyber-attacks by state and non-state actors on critical physical, financial and technology infrastructure are increasing in sophistication, volume and intensity, and digital warfare is becoming an important tool for nation states to interfere in the domestic affairs of rivals. We see cyber-attacks on business-critical infrastructure and major elections as a persistent and growing risk whose impact markets are underestimating. Our BlackRock Geopolitical Risk Indicator for a major cyber-attack(s) shows only modest market attention to this risk, implying that a cyber-attack could have an out-sized market impact. See the chart below. We believe markets are underestimating the risks as a number of broad trends are converging. Both the opportunity for attack and the threat posed are rising as the world becomes increasingly digitized. The increased use of artificial intelligence in business and proliferation of Internet-connected devices heighten exposure to cyber risks, while availability of open source code has lowered the barriers to entry for cyber crimes. [storytout] Read more on the risk of major cyber-attacks at our BlackRock Geopolitical Risk Dashboard . [/storytout] Cyber attackers today vary in sophistication and capability, ranging from well-funded government agencies to poorly resourced criminal groups and terrorist networks. With regards to the former, digital warfare is becoming an important tool of statecraft, allowing countries to pursue their geopolitical and economic objectives through a wider variety of means. For instance, in 2016, NATO expanded its definition of "war domains" beyond air, land and sea to include cyberspace, and its members are now co-operating in this area. Meanwhile, defensive capabilities in the private sector have been slow to evolve. In fact, many organizations have effectively conceded that their infrastructure will be breached, and are instead focusing on minimizing the ensuing damage.

How frequent are cyber-attacks?

General Data Protection Regulation .

Quantifying the cost of cyber-attacks

blockchain BlackRock Geopolitical Risk Dashboard Isabelle Mateos y Lago is BlackRock's Chief Multi-Asset Strategist. She is a regular contributor to The Blog . Hugh Gimber, a Multi-Asset Investment Strategist for the BlackRock Investment Institute , contributed to this post.

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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