Cybercrimes are a growing problem for individuals, businesses and governments alike. Still, many people continue to ask the question, “Why is cybersecurity important?”
For starters, no organization or industry is safe from cyber threats, and cybercrime causes damage for entities in diverse sectors every day. The most targeted sectors include healthcare, financial services, energy and pharmaceuticals.
The Equifax (NYSE:EFX) cyber attack that happened in July 2017 is one of the most notable examples — the hack allowed access to the personal and financial information of almost 150 million people.
More recently, in early 2023, Elon Musk’s social media platform X (formerly Twitter) faced a data breach that exposed the email addresses of nearly a quarter million platform users. A cyber attack on a third-party software provider for the Weather Network in mid-September 2023 had a significant impact on the service’s platform and data systems for a number of days, hamstringing the ability to post weather alerts.
Cybersecurity is becoming even more necessary for protecting critical infrastructure. As has been seen in recent years, cyber criminals are increasingly targeting physical infrastructure such as pipelines, energy grids, water distribution lines and food-processing plants. One key example is a US$4.5 million ransomware cyberattack in May 2021 that shut down the Colonial pipeline, the largest fuel pipeline in the US. In late 2022, a series of distributed denial-of-service (DDoS) attacks by pro-Russian hacktivist group KillNet temporarily took down websites for several major US airports.
There have also been plenty of malicious cyber attacks on corporations in recent years, including on Apple (NASDAQ:AAPL), Capital One (NYSE:COF), Cisco Systems (NASDAQ:CSCO), Meta Platforms (NASDAQ:FB), Marriott (NASDAQ:MAR), Under Armour (NYSE:UAA), Toyota (NYSE:TM) and Uber (NYSE:UBER).
Government agencies and businesses need to respond to these threats by adopting strict security measures. This article breaks down the three main answers to the question, “Why is cybersecurity important?” and illustrates why this market is ripe with opportunity for investors.
1. Why is cybersecurity important? Increasing threats
As noted, the number of security incidents is increasing every year, and this comes with a heavy price tag. According to a 2023 research report by IBM (NYSE:IBM), the average cost for a single data breach event in 2022 was US$4.45 million.
The firm’s 2021 edition shows that the monetary impact of a cybersecurity attack can be mitigated with the right cybersecurity measures in place. According to IBM, fully deployed cybersecurity technologies — such as artificial intelligence, analytics and automated orchestration — can reduce data breach costs by 80 percent per event.
“A data breach can have far-reaching consequences, causing financial losses and affecting an organization’s operations and compliance in the short term,” IBM states in the report. “And a major breach in the headlines can potentially damage reputation for years to come, leading to lost business and a competitive disadvantage.”
Cybercrime in the form of ransomware inflicted US$20 billion in damages globally in 2021, and Cybersecurity Ventures forecasts that costs will grow exponentially over the next 10 years to reach US$265 billion annually by 2031.
Cyber threats have expanded from harming computers and networks to targeting people, corporations, devices on the internet of things (IoT) and critical infrastructure such as railways, airports and power grids.
What investors might not know is that mobile devices are faced with rising security threats, as are medical devices. In fact, healthcare is among the most targeted sectors with the myriad internet-connected medical devices vulnerable to attack. In 2022, cyber attacks on the healthcare industry rose by 60 percent.
“Ransomware groups prefer to target organizations that are likely to pay the ransom,” notes cyber security software firm Check Point Software (NASDAQ:CHKP). “Healthcare organizations provide critical care and need to restore operations as quickly as possible, making them likely to meet attackers’ demands.”
2. Why is cybersecurity important? Severity of attacks
It isn’t just the number of cybersecurity attacks that is increasing. Their severity is on the rise as well. A single cyberattack can wreak a lot of havoc considering that, according to IBM, it can take an average of 277 days to identify and fully contain a security breach.
The cyberattack on the Colonial pipeline in 2021 forced the Georgia-based company to shut down its IT and pipeline operations. To understand the severity, consider that Colonial is responsible for providing 45 percent of the fuel for the east coast of the US, including gasoline, diesel, jet fuel and home heating oil, as well as fuel supplies to the US military. The attack disrupted supplies for several days, leading to fuel shortages and price hikes at the pump.
Colonial CEO Joseph Blount admitted the company paid a ransom of 75 Bitcoin, or around US$4.4 million at the time, to the hackers. The US Department of Justice said the government was able to recover 63.7 Bitcoin a month later, but by that time the crypto’s price had fallen by over US$20,000, meaning they were worth only US$2.3 million.
The BBC reported that while the pipeline was back online within days, it was nearly a month before seven finance systems used by the Colonial pipeline were restored.
Soon after the pipeline cybersecurity breach, another ransomware attack struck important industry infrastructure. This time, the target was global meat processor JBS, which accounts for more than one-fifth of US domestic beef supply. The Brazil-headquartered company was forced to curb activity at all its US beef plants; the attack reverberated through the company’s networks in that country and other nations, as per the Guardian.
These two major back-to-back cybersecurity attacks, one on a major US gas pipeline and the other on a major meat processor, show just how dangerous cyber threats can be.
“I think the takeaway is that if you are a corporate executive or a local government head and you thought that you would be spared, guess what? They went after your gas, they went after your hotdogs, no one is out of bounds here. Everyone is in play in every single corporation,” Christopher Krebs of the US Cybersecurity and Infrastructure Security Agency said on NBC’s Today Show after the attacks.
3. Why is cybersecurity important? Future outlook
Looking ahead, AZ Tech IT Solutions sees a number of major cyber threat trends emerging. Topping the list is, of course, ransomware, followed by AI-powered and supply chain attacks, as well as deepfakes and cloud jacking.
“Cybercriminals are becoming increasingly sophisticated in their tactics, leveraging advanced technologies and exploiting vulnerabilities in digital systems,” the firm stated.
The continuously evolving nature of cybersecurity threats means that cybersecurity companies will stay incredibly relevant — a positive trend for investors interested in the cybersecurity sector. Government officials and corporate executives are no longer asking, “Why is cybersecurity important?” — they recognize that it’s an area worthy of commitment and are taking preventative action against threats.
Grand View Research states that the global cybersecurity market will grow at a compound annual growth rate of 12.3 percent between 2023 and 2030 to reach US$500.7 billion.
“The introduction of advanced cyber security solutions, increasing cost of data breaches, emerging enterprise mobility trends, and stringent government regulations are some of the factors expected to drive the market growth,” the firm’s analysts said.
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.