Vertical Markets

Cybercrime cost: $600 billion

by Mark Rowe

Cybercrime costs businesses close to $600 billion a year, according to a report from the Washington, DC-based Center for Strategic and International Studies (CSIS) and sponsored by McAfee, part of Intel Security. The report, “Net Losses – Estimating the Global Cost of Cybercrime’, says the most important cost of cybercrime comes from its damage to company performance and to national economies. Cybercrime damages trade, competitiveness, innovation and economic growth. Studies estimate that the Internet economy annually generates between $2 trillion and $3 trillion, a share of the global economy that is expected to grow rapidly. Based on CSIS estimates, cybercrime extracts between 15 percent and 20 percent of the value created by the Internet.

Cybercrime’s effect on intellectual property (IP) is particularly damaging, and countries where IP creation and IP-intensive industries are important for wealth creation lose more in trade, jobs and income from cybercrime than countries depending more on agriculture or industries in low-level manufacturing, the report found. Accordingly, high-income countries lost more as a percent of GDP than low-income countries – perhaps as much as 0.9 percent on average.

Jim Lewis, senior fellow and director of the Strategic Technologies Program at CSIS, said: “Cybercrime is a tax on innovation and slows the pace of global innovation by reducing the rate of return to innovators and investors. For developed countries, cybercrime has serious implications for employment. The effect of cybercrime is to shift employment away from jobs that create the most value. Even small changes in GDP can affect employment.”

Impacts

CSIS researchers found that the United States notified 3000 companies in 2013 that they had been hacked. Retailers were a favorite target for hackers. Australian officials reported that large scale attacks have occurred against an airline, hotel chains and financial services companies, costing an estimated $100 million. With proper protections in place, these losses could be avoided.

The report found that global losses connected to “personal information” breaches could reach $160 billion. Forty million people in the US, roughly 15 percent of the population, have had their personal information stolen by hackers. The study tracked high-profile breaches around the world: 54 million in Turkey; 20 million in Korea; 16 million in Germany and more than 20 million in China.

Part of the losses from cybercrime are directly connected to what experts call “recovery costs,” or the digital and electronic clean-up that must occur after an attack has taken place. The McAfee-CSIS report discovered that while criminals will not be able to monetize all the information they steal, their victims must spend significant resources as if they could.

In Italy, for example, actual hacking losses totaled $875 million, but the recovery, or clean-up costs, reached $8.5 billion. In other words, there can be a tenfold increase between the actual losses directly attributed to hackers and the recovery companies must implement in the aftermath of those attacks.

Governments are beginning serious, systematic efforts to collect and publish data on cybercrime to help countries and companies make better choices about risk and policy. Improved international collaboration, as well as public/private partnerships are also beginning to show tangible results in terms of reducing cybercrime. Last week, 11 nations announced the takedown of a crime ring associated with the GameOver Zeus botnet.

Scott Montgomery, chief technology officer, public sector at McAfee, said: “It’s clear that there’s a real tangible economic impact associated with stopping cybercrime. Over the years, cybercrime has become a growth industry, but that can be changed, with greater collaboration between nations, and improved public/private partnerships. The technology exists to keep financial information and intellectual property safe, and when we do so, we create opportunities for positive economic growth and job creation worldwide.”

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