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Cyber Risk: A Growing Concern for Macro-financial Stability

The International Monetary Fund (IMF) has published a report highlighting the growing concern of cyber risk on macro-financial stability. The report uses data from Advisen Cyber Loss Data and Capital IQ to analyze 1,364 firms in 28 countries across various sectors.

Summary

The report examines the impact of cyber incidents on equity prices, market capitalization, and macro-financial stability. It reveals significant declines in equity returns for certain types of incidents and a greater magnitude of loss for smaller firms.

Key Findings

Decline in Equity Returns

• The report shows a significant decline in equity returns for:
  • Malicious data breaches
  • Network/website disruptions

Magnitude of Loss

• The magnitude of the loss is greater for smaller firms, particularly for malicious incidents.

Impact on Market Capitalization

• The impact on equity market capitalization is calculated using estimated cumulative abnormal returns for each incident-firm pair.

Drivers of Cyber Incidents

A probit regression model is employed to examine the drivers of cyber incidents. The baseline model includes various firm characteristics:

• Log (total assets)
• Firm age
• Share of asset intangibility
• Capex ratio
• Return on Assets (ROA)
• Leverage

The model is estimated over the period 2013 to 2022.

This report highlights the importance of addressing cyber risk as a growing concern for macro-financial stability. By understanding the drivers and impact of cyber incidents, policymakers and financial institutions can develop strategies to mitigate these risks and promote a more stable financial system.