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Discussing the effects of cybersecurity on credit ratings, supported by World bank credit reporting guidelines. Credit rating agencies such as Moody’s and Fitch have for some time viewed the effects of cyberattacks on corporate performance and credit ratings for some time. A risk that has a material effect on corporate performance and financial statements. Demonstrated by many high profile cyber attacks and notable downgrades such as that of Equifax.
The World Bank outlines cybersecurity controls that in its view should be adopted to safeguard cybersecurity, in turn influencing the effect of cyber attacks and credit ratings.
Widespread cyber incidents can trigger lenders to curtail credit granting in response to fears of widespread frauds that could emanate from such data incidents. The resultant credit rationing can then impact on both aggregate demand by individuals and firms⬢ profitability.â¬
Managing cybersecuirty is important as it affect direct corporate cost of capital and the pricing of securities and fixed income. The World Bank guidelines(2019) recommend enhancement of the cyber legal and regulatory environment, cyber strategy and frameworks and cyber governance. That U.S and EU regulators are adopting, with the introduction of cybersecurity risk management regulation such as the SEC cybersecuirty risk management proposal, EU NIS 2 and DORA. That will effect credit ratings.
Proposed and finalized U.S and EU cyber regulation broadly requires covered entities to implement, oversight, assure and attest their cybersecurity risk management posture, board cybersecurity knowledge and experience, education, training and cyber incidents. Reporting compliance to regulators or demonstrating compliance as a requirement for market entry.
The Data that will be evaluated by investors, credit rating agencies, insurers, and lawyers ex and post ante of regulatory compliance and a cyber event.
Ted Dziekanowski
#cybersecurity #cyberriskmanagement #creditrating
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