Companies have been dealing with the increase in cyberthreats – and now the International Monetary Fund (IMF) has cautioned about the huge expense a cyberattack could have on the financial system.
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“Cyber risk has emerged as a significant threat to the financial system,” according to a report by the IMF, adding, “ An IMF staff modeling exercise estimates that average annual losses to financial institutions from cyber-attacks could reach a few hundred billion dollars a year, eroding bank profits and potentially threatening financial stability.”
The organization says the financial sector is an attractive target to hackers because of the banks crucial role in moving funds among banks and their clients. This means a successful cyberattack on one institution could spread throughout the entire financial system.
A recent IMF study provides a framework for thinking about potential losses due to cyber-attacks with a focus on the financial sector. While the group cautions that their study on the potential financial losses should be considered illustrative – that at face value, the average annual potential losses from cyber-attacks may be large, close to 9 percent of banks’ net income globally, or around $100 billion.
In a severe scenario—in which the frequency of cyberattacks would be twice as high as in the past with greater contagion— losses could $270 billion to $350 billion.
The potential losses are much higher than the cyber insurance market with the insurance market for cyber-risk pulling in around $3 billion in premiums globally in 2017, according to the IMF, adding that most financial institutions do not even carry cyber insurance.