Cyberattacks increasingly threaten global creditworthiness: Moody’s

The rising number and sophistication of cyberattacks are increasingly eroding the creditworthiness of companies, organizations, and governments worldwide, according to a new report from Moody’s Ratings. 

The report highlights that the financial consequences of cyber incidents are becoming more severe and pervasive, affecting a wide range of sectors and entities.

Over the past decade, the number of cyberattacks has surged dramatically. Previously, cyber threats such as data breaches or distributed denial-of-service (DDoS) attacks were relatively minor and infrequently reported. 

However, the landscape changed significantly around 2016 with the rise of ransomware attacks targeting large organizations. These attacks can lock companies out of their own systems, demand ransoms, and threaten to release or sell stolen data.

Moody's report notes that cyber incidents disrupt revenues and increase costs for affected organizations. 

Business disruptions caused by cyberattacks often lead to significant financial losses, with ransomware payments and the theft of intellectual property also contributing to the economic burden. In particular, business disruption has the greatest measurable impact, dwarfing other cost categories.

The credit impact of cyber incidents often unfolds over several years. Initially, companies may face liquidity strains and increased debt as they manage immediate response costs. 

Over time, regulatory fines, legal settlements, and the need for increased cybersecurity spending can further strain profitability and cash flow. 

This delayed manifestation of financial consequences poses a significant challenge for credit rating assessments.

The severity of a cyber incident’s impact on creditworthiness varies depending on the financial health and resilience of the affected entity. Companies with low liquidity and high leverage are more vulnerable to negative credit effects, while those with diverse revenue streams and ample financial resources are better positioned to withstand the impact. 

Sovereign and regional governments, with their broader financial bases and diversified revenue sources, generally exhibit greater resilience compared to private companies.