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Outlook
December 9, 2021
3 mins

Unstoppable trends | Cyber security

December 9, 2021
3 mins
Joe Fiorica
Global Head of Equity Strategy
SUMMARY

Cybercrime continues to intensify. Large scale spending on cyber security is therefore both vital and likely to accelerate, presenting a potential opportunity for investors.


Protecting The internet’s critical infrastructure

Stealing data and ransoming businesses whose networks are vulnerable is becoming its own major industry

In this environment, ongoing expenditure on cyber security is not discretionary but essential to help mitigate risk and protect vital corporate and personal assets

We thus expect potential growth for the cyber security sector over the coming years

Companies that help protect cloud computing and the internet of things are among the major beneficiaries

The long-term viability of digitization rests upon cyber security. Companies, consumers and society at large require their data to be protected from malicious actors. The expenditure involved in securing it is not discretionary but an integral cost of doing business. As a result, we expect cyber security providers to experience continuing potential growth over the coming years and beyond. We thus believe investors should consider installing cyber security within their portfolios and keeping their allocation regularly updated according to their specific needs.

Cyber security’s role in protecting a huge part of the economy

The digital economy is large and growing fast. To take just one measure of activity, global e-commerce reached $26.7 trillion in 2020. Integral to this ongoing digital revolution is a massive increase in the flow of data. In 2022, global internet protocol traffic is expected to exceed all internet traffic up to 2016. These trends are likely to provide an ongoing productivity boost to businesses while making our lives as consumers more convenient and enjoyable. Unfortunately, the rise in digitization presents a range of attractive opportunities for cybercriminals.

The business of cybercrime

The theft of data and assets online now represents a major economic threat. According to Cyber Ventures, a cyber research organization, the annual impact of cybercrime is already around $6 trillion and could reach $10.5 trillion by 2025. There were over 1100 data breaches in the US alone last year, up from below 500 in 2012 – figure 1 in the download below. In one incident, hackers carried out a highly sophisticated attack on a US technology company, whose clients include the US government and various major companies.

In May 2021, the Colonial Pipeline, a fuel network in the Southwestern US, was disrupted for several days after a ransomware attack on the software behind it. The problems can be even more acute outside the US and particularly in emerging economies, where technology ecosystems are often less secure.

The costs of cybercrime extend far beyond the value of what is stolen. For companies that fall victim, there is often reputational damage, which harms their ongoing business. Increasingly, they may also face regulatory sanctions if they are found not to have adequately protected others’ data. Cyberattacks that target vital infrastructure have the potential to cause widespread disruption to other businesses and even economy-wide harm. And national security and human life is at threat when hackers target government and other highly sensitive data systems.

1Measuring e-commerce and the digital economy, UNCTAD, 2020: https://unctad.org/topic/ecommerce-and-digital-economy/measuring-ecommerce-digital-economy
2Measuring e-commerce and the digital economy, UNCTAD, 2020: https://unctad.org/topic/ecommerce-and-digital-economy/measuring-ecommerce-digital-economy
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