Investors still in the dark as cyber threat grows

Fri Aug 28, 2015 10:38am EDT
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By Simon Jessop and Ross Kerber

LONDON/BOSTON (Reuters) - Investors are being poorly served by a haphazard approach from fund managers to the growing threat of cyber crime damaging the companies in which they invest, with a lack of clarity from the businesses themselves compounding the problem.

Banks have led the way in developing cyber defenses and some top fund managers have ramped up pressure on companies to do more, but the broader picture is less encouraging.

"I don't see any visible stand asset managers are taking, like they do on other social responsibility items," said Malcolm Harkins, information security chief at U.S. cyber security start-up Cylance Inc.

The soft underbelly of companies outside the banking sector was exposed again this month when hackers leaked details of nearly 37 million clients of Ashley Madison. The infidelity website had to postpone its stock market listing and now faces a $750 million lawsuit.

More than half the value of companies worldwide is in intangible assets, such as intellectual property, much of which is stored on computers and could therefore be vulnerable to hackers.

That figure could be as high as $37.5 trillion of the $71 trillion in enterprise value of 58,000 companies, according to Brand Finance, a consultancy specializing in valuation of intangible assets. The World Economic Forum said that robust protection against cyber risk could add as much as $22 trillion to the global economy by 2020.

The global financial cost of attacks is rising fast -- up more than 10 percent last year, a report by specialist researcher Ponemon Institute said.

Though some might argue that investors can sell out of businesses they consider to be performing badly on cyber safety, the reality is less straightforward. Passive funds that track a specific index or sector have no leeway, while pension funds tend to demand a longer-term view from asset managers.   Continued...

An illustration picture shows a projection of binary code on a man holding a laptop computer, in an office in Warsaw June 24, 2013. REUTERS/Kacper Pempel