A paper published by the Brookings Institute of Columbia University found that despite greater widespread understanding of cyber risk and cyber defense, existing gaps in network security may still allow cyber attacks to occur consistently enough to lead to financial instability across the US. The paper is a result of two years of research and engagement by Columbia’s School of International and Public Affairs with observers and operators within finance, cybersecurity, and industry compliance sectors.
The research conducted by the authors studied the relation between financial stability and cyber risk, the former as defined within the paper as the ability of the national financial system to sustain and manage risks and disruptions while continuing to enable monetary exchanges. The danger posed by cyber risk – or any other economic disturbance for that matter – is that incidents may lead to the creation of “systemic cycles that could severely weaken or shut down the economy.”
A primary concern regarding the effect of cyber incidents on financial stability is the risk of “contagion,” meaning that a single occurrence or multiple isolates ones will generate additional economic consequences. While this danger is present for several other factors that determine financial stability, the nature of cybersecurity is such that it inherently poses a genuine hazard to the national economy if certain circumstances occur.
As the paper illustrates, both finance and cybersecurity rely on limited channels, sensitive data, and participant confidence to function. Any disruption in any of these areas presents a potential escalation that will produce continuous disturbances that will interrupt the entire system. In the case of network security trends, there is an added danger from external threats due to the proliferation of cyber attack methodologies and incentives, including cyber terrorism and cyber espionage.
Spread of Cyber Attack
The sophistication of cyber attack techniques has led to a real danger of financial stability being disrupted by hackers with monetary or political goals – or both. Cybercrime presents an opportunity for opposing nation states to hit adversaries while also benefiting financially, or to incentivize independent operators to carry out attacks on their behalf. Russian, China, North Korea, Iran and a few other countries have all been accused of funding either type of campaign to disrupt rival nations, with the US often being a prime target.
The internecine nature of modern cyberwarfare means that there are ample national players and individual operator networks available for collaborative efforts in taking down bigger targets. Even an attack designed for a one-time theft might cause significant damage for the sake of expediency, and the entire world economy could suffer from unforeseen consequences. However, the greater danger still lies with an attacker intentionally triggering a financial crisis to inflict the most economic disruption possible.
Improving Cybersecurity Practices
Despite the very real threat of cyber risk affecting financial stability, the good news is that the growing awareness of cyber threat on the federal, corporate and personal levels is contributing to improvements in existing economic safeguards. The rising number of data privacy regulations from state agencies as well as the more stringent guidelines being imposed by industry associations reflect a more serious approach to cybersecurity best practices emerging nationally. As the world becomes more interconnected through the Internet, opportunities for cyber risk will increase and so too will the standards designed to protect against it.
Read up on the most common hacking techniques to familiarize yourself with the signs of an attempted intrusion and prevent being caught off-guard.