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There are two market dynamics that relate to cybersecurity risk management and publicly traded organizations. The first is that the share price of public firms drops when they announce an initial cyber attack. The past 4 months (since the announcement of the SEC final rule), has seen several public firms report cyber incidents leading to significant shifts in share price. Companies such as MGM, Caesars, Clorox and Okta noted falls in share price following cyber attacks. But from December 2024 covered organizations will have to report material cyber risks and material incidents in detail to the regulator. Reporting information used to define materiality and the effects of a cyber incidents on strategy, operations and financial performance. Will we see bigger swings downwards in share price. Swings that play into shorting?
Secondly Ted Dziekanowski, what role will the activist short seller play? As organizations undergo cyber attacks will they see it as an opportunity to short sell? When markets thought organizations had implemented appropriate cybersecurity and therefore protecting shareholder value, yet the reality may prove to be different? The moment a hacker reports a cyber attack (they sometimes get to market first), then investors are given notice of an issue affecting share price, before an organisation has time to react.
A further observation is that under new U.S and EU cyber regulations, while stocks rebound, cyber regulatory processes and legal challenges drag on for years. Creating opportunities for markets to rethink their investment strategies and price in, or out, regulatory penalties.
Brian D. McCarthy
#paravasecuritysolutions #cybersecurity #cyberriskmanagement
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