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With data breaches occurring more frequently, there is a notable
concern for institutional investors and money managers. Cyber
incidents can damage a company's reputation and market
capitalization, as one
recent study found that share prices fall by an average of 5
percent after the disclosure of a data breach.
Over the last year, we've seen the implications of cyber
incidents on social media platforms like Facebook and Twitter.
Then, just about a month ago, global hospitality giant Marriott
International announced that data on approximately 500 million of
its customers has been breached by cyber criminals. These types of
attacks are not only catching the eyes of investors - they are also
coming under the scrutiny of international governments.
Given these developments - and the associated risks they create
for portfolios - what can money managers (and those with a
fiduciary responsibility) do to protect their assets?
To get ahead of cyber criminals, investment managers are using
Research Signals Cybersecurity Factors in their
decision making procedures. Research Signals provides 35
cybersecurity risk factors on more than 3,000 public companies,
complemented by the expertise of BitSight, a leading provider of
cybersecurity intelligence.
In alliance with BitSight, Research Signals delivers objective,
quantitative measurements on a company's security performance, with
daily security ratings ranging from 250 to 900. Values are
determined by BitSight's analysis on security events involving
malware, vulnerabilities, user behavior and more - with ratings
determined by sophisticated algorithms that use externally
observable, non-intrusive methods.
In our 2018 whitepaper on cybersecurity, we
noted: "Technology and telecommunication services have been the
weakest sectors over time, an interesting fact given that they are
on the cutting edge of technology, but perhaps suggesting that
their lines of business provide more opportunities to be hacked and
are the hardest to protect against cyber risks. These observations
indicate an industry adjustment may be warranted, which we address
in our factor calculations."
Fast forward to the top of this year, and the Research Signals
US Large Cap universe of approximately 1,000 stocks shows that 340
companies with a high risk score lower than 600. Of those, 21% are
in the technology sector and another 21% are in the cyclical goods
& services sector.
And that only covers about one third of the stocks that Research
Signals is tracking.
While it's true that cybersecurity is a very serious
contemporary issue for investors, the good news is that strong
intelligence is available to help gauge a company's
preparedness.
Research Signals can provide specific company scores to our
customers upon request. For more information, please contact Katerina Lipatova
to learn more.
Posted 15 January 2019 by Katerina Lipatova, Director, Research Signals, IHS Markit
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
