A Cyber Attack Could Cause The Next Financial Crisis

Ever since the forced bankruptcy of the investment bank Lehman Brothers triggered the financial crisis 10 years ago, regulators, risk managers, and central bankers around the globe have focused on shoring up banks’ ability to withstand financial shocks.

But the next crisis might not come from a financial shock at all. The more likely culprit: a cyber attack that causes disruptions to financial services capabilities, especially payments systems, around the world.

Criminals have always sought ways to infiltrate financial technology systems. Now, the financial system faces the added risk of becoming collateral damage in a wider attack on critical national infrastructure.  Such an attack could shake confidence in the global financial services system, causing banks, businesses and consumers to be stymied, confused or panicked, which in turn could have a major negative impact on economic activity.

Cybercrime alone costs nations more than $1 trillion globally, far more than the record $300 Billion of damage due to natural disasters in 2017, according to a recent analysis our firm performed. We ranked cyber-attacks as the biggest threat facing the business world today, ahead of terrorism, asset bubbles, and other risks.

An attack on a computer processing or communications network could cause $50 billion to $120 Billion of economic damage, a loss ranking somewhere between those of Hurricanes Sandy and Katrina, according to recent estimates. 
Yet a much broader and more debilitating attack isn’t farfetched. Just last month, the Federal Bureau of Investigation issued a warning to banks about a pending large scale attack known as an ATM “cash-out” strike, in which waves of synchronized fraudulent withdrawals drain bank accounts. 

In July, meanwhile, it was revealed that hackers working for Russia had easily penetrated the control rooms of US electric utilities and could have caused blackouts.

How might a financial crisis triggered by a cyber-attack unfold? A likely scenario would be an attack by a rogue nation or terrorist group on financial institutions or major infrastructure. Inside North Korea, for example, the Lazarus Group, also known as Hidden Cobra, routinely looks for ways to compromise banks and exploit crypto currencies. 

An attack on a bank, investment fund, custodian firm, ATM network, the interbank messaging network known as SWIFT, or the Federal Reserve itself would represent a direct hit on the financial services system.

Another possibility would be if a so-called hacktivist or “script kiddy” amateur were to use malicious programs to launch a cyber-attack without due consideration of the consequences. Such an attack could have a chain reaction, causing damage way beyond the original intent, because rules, battle norms, and principles that are conventional wisdom in most warfare situations but don’t exist in a meaningful way in the digital arena. 

For example, in 2016 a script kiddie sparked a broad denial-of-service attack impacting Twitter, Spotify, and other well-known Internet services as amateurs joined in for mischief purposes.

Whether a major cyber-attack is deliberate or somewhat accidental, the damage could be substantial. Most of the ATM networks across North America could freeze. Credit card and other payment systems could fail across entire nations, as happened to the VISA network in the UK in June. 

Online banking could become inaccessible: no cash, no payments, no reliable information about bank accounts. Banks could lose the ability to transact with one another during a critical period of uncertainty. There could be widespread panic, albeit temporary.

Such an outcome might not cause the sort of long-simmering financial crisis that sparked the Great Recession, because money would likely be restored to banks and payments providers once systems were back online.  At the same time, it isn’t clear how a central bank, the traditional financial crisis firefighter, could respond to this type of crisis on short notice. After the problem is fixed and the crisis halted, a daunting task of recovery would loom. It would be even more difficult if data were corrupted, manipulated or rendered inaccessible.

How can we prevent such a scenario? Companies must implement systems that enable them to stop the spread of a cyber-attack contagion, and to resume operations as rapidly and smoothly as possible. The financial services industry needs to fully agree on, and be prepared to practice, coordinated response and recovery strategies to prevent systemic breakdowns. 

Regulators in many nations have been working diligently to prepare for and curtail cyber-attacks, but they need to look beyond their own borders and introduce regulations, laws, and cooperative frameworks in unison, like the European Union’s Network and Information Security Directive, which is designed to protect an ever-growing list of critical infrastructure from banking and healthcare systems to online marketplaces and cloud services.

Many of these steps are being undertaken to varying degrees. But more needs to be done. An attack that undermines confidence in those very machines also could have debilitating consequences on the flow of money between consumers, businesses, and financial institutions around the world.

Harvard Business Review

You Might Also Read: 

Big Companies Have An Achilles Heel:

Bank Industry Is Turning On To AI Technology:
 

« Iranian Hackers Target Universities For Secret Research
Students Blamed For University & College Cyber Attacks »

CyberSecurity Jobsite
Perimeter 81

Directory of Suppliers

CSI Consulting Services

CSI Consulting Services

Get Advice From The Experts: * Training * Penetration Testing * Data Governance * GDPR Compliance. Connecting you to the best in the business.

XYPRO Technology

XYPRO Technology

XYPRO is the market leader in HPE Non-Stop Security, Risk Management and Compliance.

Cyber Security Supplier Directory

Cyber Security Supplier Directory

Our Supplier Directory lists 6,000+ specialist cyber security service providers in 128 countries worldwide. IS YOUR ORGANISATION LISTED?

ManageEngine

ManageEngine

As the IT management division of Zoho Corporation, ManageEngine prioritizes flexible solutions that work for all businesses, regardless of size or budget.

Perimeter 81 / How to Select the Right ZTNA Solution

Perimeter 81 / How to Select the Right ZTNA Solution

Gartner insights into How to Select the Right ZTNA offering. Download this FREE report for a limited time only.

Threat Intelligence

Threat Intelligence

Threat Intelligence is a specialist security company providing penetration testing, threat intelligence, incident response and training services.

CICRA

CICRA

CICRA is Sri Lanka's pioneering cyber security training and consultancy provider.

ENLIGHTENi

ENLIGHTENi

ENLIGHTENi are the platform to develop next-gen talent in Technology, Risk, and Cybersecurity. Our mission is to develop next-gen talent through challenge-based learning and team collaboration.

Cambridge Cybercrime Centre

Cambridge Cybercrime Centre

The Cambridge Cybercrime Centre is a multi-disciplinary initiative combining expertise from the Department of Computer Science and Technology, Institute of Criminology and Faculty of Law.

THEC-Incubator

THEC-Incubator

THEC-Incubator program is designed for international and ambitious tech startups in the Netherlands. Areas of focus include Blockchain and Cyber Security.

Diateam

Diateam

Diateam is an R&D company specializing in computer security. Diateam develops highly innovative cyber range platforms and Industry-leading systems for cybersecurity training and testing labs.

Cryptoloc

Cryptoloc

Cryptoloc's core business is developing solutions designed to protect businesses from all kinds of security threats using a unique patented cryptography.

Depth Security

Depth Security

Depth Security assessment services provide organizations with real-world visibility into threats facing their infrastructure and applications.

DisruptOps

DisruptOps

Built for today’s cloud-scale enterprises, DisruptOps’ Cloud Detection and Response platform automates assessment and remediation procedures of critical cloud security issues.

SHIELD

SHIELD

SHIELD are the world’s leading cybersecurity company specializing in cyber fraud and identity solutions.

Nonprofit Cyber

Nonprofit Cyber

Nonprofit Cyber is a first-of-its-kind coalition of global nonprofit organizations to enhance joint action to improve cybersecurity.

Hexens

Hexens

Hexens introduces a whole new approach to cybersecurity solutions. Indisputable skills and a unique super-focused perspective on every single case are the values we create.

Information Systems Security Association (ISSA)

Information Systems Security Association (ISSA)

ISSA is the community of choice for international cybersecurity professionals dedicated to advancing individual growth, managing technology risk and protecting critical information and infrastructure.

MyKRIS Asia

MyKRIS Asia

MyKRIS specialise in providing and managing Internet network services and cyber security services to enterprises.

Piiano

Piiano

Piiano offers developer-friendly privacy and security products. Reduce risk and protect your data by using our specialized security and privacy SaaS tools.

XONA

XONA

XONA is The Zero Trust user access platform for the OT enterprise. Secure operational access to critical systems - from anywhere.