Cyberattacks Threaten Stability of Interconnected Financial Services

The danger of a cyberattack capable of generating a financial crisis is growing.

Experts fear that the digital interconnectedness of the financial services industry means that a successful hack of a company could spur a domino effect. The threat is severe enough that multilateral organizations from the IMF to the Bank for International Settlements warn that financial stability is at risk. The surge in remote work during the pandemic has exposed companies' digital infrastructures even more.

"The threat landscape is changing rapidly. [Cybercriminals] are more sophisticated and better resourced," Emran Islam, senior financial sector expert at the IMF, said in an interview. "This is almost a fait accompli. There will be cyber incidents and they will increase in size and seriousness."

The World Economic Forum has ranked cyber-related issues as the second greatest risk, after environmental ruptures such as climate change, that businesses will face over the next 10 years. Executive Chairman Klaus Schwab told the July 2020 gathering of the organization that the COVID-19 crisis was "a small disturbance in comparison to a major cyberattack," referring to such an event as a "cyber pandemic."

Companies often are wary of disclosing when they have been hit with a cyberattack so there is limited data to reveal the scale of the problem, but "there has been a huge spike, especially in the COVID period," Islam said. Two of the most notable cyberattacks this year ensnared U.S. energy group Colonial Pipeline Co. and the Brazilian meat-processing giant JBS SA.

The IMF found that cyberthreats could cost banks up to 9% of their average annual net income globally, or about $100 billion, according to a 2018 study. "If a major incident crystalizes across the global economy [the cost] will be very, very substantial," Islam said.

Read more