A Frost & Sullivan study commissioned by Microsoft revealed that the potential economic loss in the Philippines due to cybersecurity incidents can hit a staggering US$3.5 billion. This is 1.1 percent of the Philippines’ total GDP of US$305 billion.
The study, titled “Understanding the Cybersecurity Threat Landscape in Asia Pacific: Securing the Modern Enterprise in a Digital World”, aims to provide business and IT decision makers with insights on the economic cost of cybersecurity breaches in the region and identify the gaps in organizations’ cybersecurity strategies. The study involved a survey of 1,300 business and IT decision makers ranging from mid-sized organizations (250 to 499 employees) to large-sized organizations (>than 500 employees).
The study reveals that more than half of the organizations surveyed in the Philippines have either experienced a cybersecurity incident (18%) or are not sure if they had one as they have not performed proper forensics or data breach assessment (34%).
“As companies embrace the opportunities presented by cloud and mobile computing to connect with customers and optimize operations, they take on new risks,” said Hans Bayaborda, Managing Director, Microsoft Philippines. “With traditional IT boundaries disappearing the adversaries now have many new targets to attack. Companies face the risk of significant financial loss, damage to customer satisfaction and market reputation — as has been made all too clear by recent high-profile breaches.”
The True Cost of Cybersecurity Incidents – Economic, Opportunity and Job Losses
The study revealed that a large-sized organization in the Philippines can possibly incur an economic loss of US$7.5 million, more than 200 times higher than the average economic loss for a mid-sized organization (US$35,000); and Cybersecurity attacks have resulted in job losses across different functions in seven in ten (72%) organizations that have experienced an incident over the last 12 months.
To calculate the cost of cybercrime, Frost & Sullivan has created an economic loss model based on macro-economic data and insights shared by the survey respondents. This model factors in three kinds of losses which could be incurred due to a cybersecurity breach:
- Direct: Financial losses associated with a cybersecurity incident – this includes loss of productivity, fines, remediation cost, etc;
- Indirect: The opportunity cost to the organization such as customer churn due to reputation loss; and
- Induced: The impact of cyber breach to the broader ecosystem and economy, such as the decrease in consumer and enterprise spending.
“Although the direct losses from cybersecurity breaches are most visible, they are but just the tip of the iceberg,” said Edison Yu, Vice President and Asia Pacific Head of Enterprise for Frost & Sullivan. “There are many other hidden losses that we have to consider from both the indirect and induced perspectives, and the economic loss for organizations suffering from cybersecurity attacks can be often underestimated.”
In addition to financial losses, cybersecurity incidents are also undermining the Philippines organizations’ ability to capture future opportunities in today’s digital economy, with more than half (57%) respondents stating that their enterprise has put off digital transformation efforts due to the fear of cyber-risks.
Key Cyberthreats and Gaps in the Philippines Organizations’ Cybersecurity Strategies
Although high-profile cyberattacks, such as ransomware, have been garnering a lot of attention from enterprises, the study found that for organizations in the Philippines that have encountered cybersecurity incidents, data exfiltration and data corruption are the biggest concern as they have the highest impact with the slowest recovery time.
Besides external threats, the research also revealed key gaps in organizations’ cybersecurity approach to protect their digital estate:
- Security an afterthought: Only 44% of organizations consider cybersecurity before the start of a digital transformation project. Majority of respondents (56%) either think about cybersecurity only after they start on the project or do not consider it at all. This limits their ability to conceptualize and deliver a “secure-by-design” project, potentially leading to insecure products going out into the market.
- Creating a Complex Environment: Negating the popular belief that deploying a large portfolio of cybersecurity solutions will render stronger protection, the survey revealed that 17% of respondents with more than 50 cybersecurity solutions could recover from cyberattacks within an hour. In contrast, more than twice as many respondents (38%) with fewer than 10 cybersecurity solutions responded that they can recover from cyberattacks within an hour; and
- Lacking cybersecurity strategy: While more and more organizations are considering digital transformation to gain competitive advantage, the study has shown that 46% of respondents see cybersecurity strategy only as a means to safeguard the organization against cyberattacks rather than a strategic business enabler. A mere 25% of organizations see cybersecurity strategy as a digital transformation enabler.
“The ever-changing threat environment is challenging, but there are ways to be more effective using the right blend of modern technology, strategy, and expertise,” added Hans. “Microsoft is empowering businesses in the Philippines to take advantage of digital transformation by enabling them to embrace the technology that’s available to them, securely through its secure platform of products and services, combined with unique intelligence and broad industry partnerships.”