Cybersecurity market grows slowly but surely as nations ramp up cyber defences

When the NotPetya malware popped up in computers around the world in June 2017, it went on to do $10billion of damage globally. NotPetya was initially a targeted attack on Ukraine, but it spread far beyond its borders.

The malware eventually found its way to the computer systems of Mondelez International, a multinational food company headquartered in Chicago. Disruptions of email systems, logistics, and file access went on for weeks, and total damages were estimated at more than $100 million. When Mondelez tried to file a claim with its insurer, Zurich, they were denied on the basis of the attack being a ‘warlike’ action which was excluded from insurance policies.

Since then, major insurers have been reshaping the language of their policies to prepare for disputes in the cybersphere, while nations have been stepping up their cyber protection game on a large scale.

Just one day before the recent war broke out in Ukraine on February 24, there was a severe cyberattack on multiple government websites as well as data-wiping malware being planted in computers belonging to Ukrainian organisations. When the invasion began, cyberattacks over the next two days also increased by more than 800%.

While Ukraine requested a Cyber Rapid Response Team from the EU to assist, there were widespread fears of the cyberattacks spilling over once again to the rest of the world. Within a few weeks, global governments had been seen bolstering their cyber defences.

Britain’s National Cyber Security Centre (NCSC) called on British organisations to strengthen their cyber protection, stating ‘there has been a historical pattern of cyber attacks on Ukraine with international consequences’. The US Senate swiftly passed a new bill requiring critical infrastructure operators and federal agencies to report cyberattacks within 72 hours and ransomware payments within 24 hours.

On the other side of the world, Singapore’s Cyber Security Agency (CSA) rolled out a cybersecurity certification scheme. The scheme aims to recognise organisations with good cyber security practices and mitigate potential risks and attacks, which could be particularly helpful for small and medium-sized enterprises (SMEs) which tend to have limited cybersecurity resources.

Earlier, the Danish bank created a thematic investment basket which contains 25 of the largest cybersecurity companies involved in developing, implementing, and managing security protocols. These companies include VeriSign Inc., NortonLifeLock Inc., and Radware Ltd.

Senior Quantitative Analyst Anders Nysteen reported that while we have seen remarkable growth in half of these companies, the other half has reported negative operating margins every year. Yet these figures should not be a cause for concern. He explained that the cybersecurity industry is traditionally ‘an industry where growth has been prioritised over profitability’, but with the huge investments made by countries around the world to bolster cyber safety, profitability is expected to ‘improve over time’.

Saxo Bank is not alone in its strategy and predictions. Other investment sites have jumped on the train to analyse and recommend cybersecurity stocks readers should invest in. Investing.com’s Ronald Kaufman suggested readers invest in ‘specialised funds comprising of companies operating in software and networking industries, as well as other industries like defence and aerospace’. The Motley Fool’s Jeff Little also ran a piece on the expanding opportunities data protection can offer companies and investors, pointing to the possibility of diversifying portfolios with a cybersecurity ETF.

With an increased risk of cyber threats, the cybersecurity industry is receiving more attention than usual lately. Global nations are on guard, and enterprises and insurers are treading with caution. For the privileged not immediately affected by war, the rising demand for cyber protection tools and services give them some opportunity to profit from the growth of this market.

Writer, trader, husband, and dad- Ludovic Gauthier, is the author of more than 2500 finance-related blogs for various FX and Stock trading sites.