E Caveat Emptor! Cyber Crime Threatens To Derail The Growing Digital Economy

Securing computer networks has become paramount in the new digital age. Computer and network security, most often referred to as cyber security, involves safeguarding Americans private information, securing financial data, protecting national military secrets, and creating a bulwark around our most important intellectual property secrets that drive our economic growth.

The Internet was founded on the principal of information sharing. But it is the interconnectedness of everything that has made us more vulnerable to our enemies. As President Obama stated,

It's the great irony of our Information Age -- the very technologies that empower us to create and to build also empower those who would disrupt and destroy.  And this paradox -- seen and unseen -- is something that we experience every day.

The annual costs of Cybercrime have recently been estimated by McAfee at over $400 billion. The McAfee study noted that cyber crime costs about 15% of the Internet revenues, a lofty sum. Most businesses would certainly categorize a risk of 15% to their business as substantial, and even develop strategic initiatives to address such a large risk.

However, studies also show that most businesses are not dealing that issues that online crime create effectively enough. According to the 2014 Verizon Data Breach Investigations Report, the gap between the amount of time it takes to hack systems versus the time responders are able to discover the hacks is widening. This does not account for the extra time it takes to resolve the network security issues and put in place future preventative measures. The trend shows that the increased efficiency of the attackers is overwhelming current incident response teams and creating chaos on the Internet.

Figure 1: Discovery time versus breach time

Given the spate of point of sale (POS) related attacks within the last two years, cyber crime is threatening not only to cost businesses more and more of their online profits, but to create uncertainty in the American marketplace. This uncertainty is an unwelcome addition to the current list of concerns regarding our economy. While Americans can endure certain amounts of financial shocks, cyber crime’s relentless advance threatens to derail the digital economy we are counting on more and more for economic expansion.

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The author is not invested in any funds mentioned in the article. 

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Terry Chrisomalis 5 years ago Contributor's comment

I like this article because it holds true after all the retail stores and other systems getting hacked. Although some blame can be attributed to the fact that some of these companies don't want to put up the big money to secure their networks more as they should.

Robert Kientz 5 years ago Author's comment

The retail systems issue is complicated by the fact that technology is not standardized, which makes employing security very difficult and costly. The time is coming when companies will have to make the choice between paying for security by implementing strong controls, or paying more for it later when breaches are published.

For investors, I strongly recommend reading the detailed financial statements for any parts relating to security costs and company controls.