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Blog

Exploring the Cyber-Value Connection

The JM Group recently had the pleasure of visiting the Oriental Club for a talk on Cyber Security in 2017.  One of the speakers was Andrew Rogoyski of CGI.  Andrew gave a fascinating insight into the effects of a cyber security breach, including how a severe incident can lead to a decline in share price. In the spring of this year, CGI released the second in its cyber security research series.  Key findings of the research were:
  • Over a third of C-suite executives believe a cyber security breach will affect their organisation in the next 12 months
  • The average annual cost of a breach is estimated at £1.2m, although damage to a brand's reputation is of most concern
  • 81% of boardrooms say they've increased scrutiny of their cyber defences since 2015
The Cyber-Value Connection Cyber risk has risen to the top of the corporate agenda but few company leaders are aware of the full extent of damage caused by a cyber breach — or the full costs. CGI has worked with Oxford Economics to create a rigorous model that captures the damage done by cyber breach to a company’s share price. The Cyber-Value Connection reveals that share prices fall by an average of 1.8 per cent on a permanent basis following a severe breach. To put that in context, investors in a typical FTSE 100 firm would be worse off by an average of £120 million. However, in some extreme cases, breaches have wiped as much as 15 per cent off affected companies’ valuations, substantially more than this sum. The damage to shareholder value is significant today — but The Cyber-Value Connection analysis suggests severe cyber breach will become even more costly in the future as industry analysts include cyber as a factor affecting valuation and new regulation demands that companies disclose incidents. Clearly, the CEO has responsibility for increasing company value. With the link between cyber breach and company value established in this report, it is clear the CEO’s responsibility must also include direction and governance of cyber security. The Cyber-Value Connection concludes with advice on how they can challenge their organisation and put in place effective governance. Read or download a copy of the full report in PDF format.

Andrew Rogoyski, Vice President, Cyber Security