Evaluating the financial effect from cyber attacks on firms and analysis of cyber risk management

Abstract

In our epoch, internet is an integral part for business activity. Giant firms, like Amazon, are exclusive dependent from internet activities, while numerous other sectors, for example finance corporations, have developed online activity. Everyday online transactions produce large amount of revenue. A possible outage of normal internet operation can cause severe costs in a firm’s business. Damages can be even intangible, as company’s reputation will be questioned. Cyber criminals are not unaware of the benefits gained from a potential cyberattack. They find vulnerable systems and expose even technology colossus such as Google. Public is upset as countless of sensitive private data are stored in online systems and are targeted by hackers. In this work we try to point out some tools for managing the risk emanating from a cyberattack. Furthermore, we conduct an empirical analysis to investigate the effect of a security breach on firm’s value. Our purpose is to cover the time period 2015-2017 with no relative announced studies yet as cyberattacks multiple year by year. We employed event study methodology using the single market model. Our results reveal negative impact on an affected firm due to cyberattack to the event date, although without statistical significance. Still this research field is in its infancy and we anticipate new studies with strong conclusions in the near future.