Cyber Attacks & Why They Will Continue To Matter

Since 2005, Ransomware and cyber attacks have been the most common cyber threat. You may be asking yourself “what is ransomware”?

Ransomware is a virus designed to block parts of your computer from use. To unlock your computer, victims are forced to pay a sum to the entity or individual behind the virus.

Unfortunately, cyber attacks are rapidly rising in prevalence; and for many companies, spending millions on cyber security has rapidly become normalized.

Origin Stories Of Cyber Attacks

The first ransomware occurred in 1989 by a Harvard graduate named Joseph Popp. Since then, Ransomware has grown to cost global citizens and business roughly $1 billion in 2016. You may have heard of a ransomware attack that spread across the globe in mid-May of 2017 named “ WannaCry “. The results of this attack resulted in close to $4 billion dollars in payments. Clearly, these payments are on the rise.

How Do Cyber Attacks Work?

The origin of ransomware occurs when a hacker sends a victim an email with a link or file to open. This is known as the “trojan”, gaining its name from Trojan Horse that held Greek soldiers. The file is much like what happened in history. Once you bring it in past your city walls, or firewall, your computer is then infected. From there, the virus locking you out of files, programs, and even your entire computer.

Global security has been changed by ransomware. There is now security software you can download on your computer to help protect your computer. Additionally, companies are proactively spending millions to protect their systems. As a general rule, don’t open any links or attachments you receive unless you know AND trust the sender.

But how exactly do cyber attacks impact the marketplace? Let’s take a closer look as we step closer to achieving financial fluency.

Cyber Attack’s Effect on Investing in Public Companies

What effect do cyber attacks have on companies? Let’s take a look at the effect it has had recently on Danish shipping giant A.P. Moller-Maersk. Maersk is so large that it is responsible for 1 out of every 7 containers shipped globally.

When it was announced that Maersk was a victim of a cyber attack, the stock dropped 1.55% within the hour.

This decline resulted from fears that the cyber attack could hurt company’s brand, reputation, and bottom line. When it was announced they were able to successfully beat the cyber attack, the shares rallied 2.75%.

Generally, cyber attacks on a company result in short-term declines but in the long term don’t affect the stock price. That is usually because the makers of these viruses know companies’ files are backed up and can be replaced. But if companies can’t fight off a virus or the ransom is low, many just opt to pay the ransom.

The Bottom Line

One publicly traded company that has performed very well recently is cyber defense giant FireEye Inc. ( FEYE). When the WannaCry attacks took place, FireEye’s stock price rose 10% in just 3 days. In the same 3 days, most major tech stocks were down 1–2%. This raises the idea that owning some cyber defense stock may be a very good hedge; this is particularly true against the possibility that one of your holdings is affected by a cyber attack.

In 2004, the global cyber security market was worth just $3.5 billion. In 2017, it is now worth about $150 billion. By 2021 analysts at top banks such as Goldman and JP Morgan expect it to be a $1 trillion industry. By surrounding yourself with a greater understanding of the markets, you can continue to step closer to financial fluency.

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Originally published at https://blog.rapunzlinvestments.com on July 3, 2017.