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Credit implications of cyberattacks will hinge on long-term business disruptions

Publication Date: 28 Feb 2019 - By Gaurav Sharma (Associate Editor ReachX) By Gaurav Sharma (Associate Editor ReachX)
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Equity Fundamental Environmental, Social & Governance Macro Equity Multi Asset Global Technology Consumer Financial Services Construction

The growing intersection of global supply chains, connectivity and access to data is creating new vulnerabilities for governments and businesses with the potential for significant cyberattacks.

In a report for its clients, rating agency Moody’s said four sectors with $11.7trn in rated debt outstanding have high risk exposure to cyberattacks.

To develop a framework for understanding inherent cyber risk at the sector level, Moody's looked: 1) vulnerability to the type of attack or event to which entities in a given sector are exposed,

and, 2) potential impact of cyber events via disruption of critical businesses processes or negative reputational effects that lead to a loss of revenue as a result of customer attrition, for example.

“The four sectors are banks, securities firms, financial market infrastructures and hospitals, all of which rely heavily on technology for operations, distribution of content or customer engagement and are at high risk,” the agency noted. 

Moody's Managing Director Derek Vadala said: "We view cyber risk as event risk that can have material impact on sectors and individual issuers. Data disclosure and business disruption are the two primary types of cyber event risk that we view as having the potential for material impact on issuers' financial profiles and business prospects."

For purposes of research, the agency looked at 35 total sectors and over $70trn total debt outstanding, before reaching its conclusions on the above sectors.

 

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