WannaCry boosts outlook for cybersecurity sector

Cybersecurity is on course to dominate the corporate agenda for yet another year as big names admit to being impacted by the WannaCry virus malware attack.

The latest attack caused major problems for the UK´s NHS service, with some hospitals forced to shut down their computer and telephone systems.

Big company names are also in the firing line, with the likes of Spain-based Telefónica, German rail network Deutsche Bahn and US logistics company FedEx among those known to be affected.

WannaCry

WannaCry is a so-called cryptovirus: it causes mayhem by encrypting the files stored on victims´ computers.

Users are locked out of their own machines and warned through an on-screen message that they will not be able to regain access unless they make a payment in the bitcoin digital currency.

Furthermore, the criminals have combined WannaCry with a worm-type application which multiples itself so that it can go on to invade yet more computers.

Growing threat

Cybersecurity problems appear to only get worse, with experts claiming the scale of the latest malware attack is unprecedented.

The intelligence agencies believe as many as 200,000 computers have already been infected by WannaCry. However, there may be much more disruption on its way as it is thought another 1.3m systems remain vulnerable.

Share price impact

So far, the share price impact on the companies known to be affected is relatively negligible. Investors, however, need to keep a careful watch on how this latest cybersecurity drama develops.

Over recent years, there have been some notable share price moves owing to high-profile cybersecurity scandals.

Among them was UK-based telecoms group TalkTalk, which saw its reputation considerably tarnished after a cyberattack in the autumn of 2015, whereby the personal and financial data of thousands of its customers were stolen. Shares in TalkTalk plummeted by over 10% when details of the cyberattack emerged, but the longer-term reputational damage will surely be much greater.

Technology risk

Technology and financial services firms would appear more sensitive to cybersecurity threats given the vital importance of customer data to the operation of their businesses.

In December, internet behemoth Yahoo! revealed that as many as a billion of its customer accounts had been affected by a security breach.

At the same time, WannaCry highlights how a diverse range of firms can be heavily compromised as their computers and systems get shutdown. Trains could potentially stop working, parcels could cease to be delivered and lights in hospital wards switched off.

Open windows

The WannaCry virus is thought to have exploited a flaw in Microsoft Windows. Computers running on the Windows XP operating system are thought to be especially susceptible, a system that was introduced in 2002.

Around 70 million computers globally are believed to be running on the old XP system, though Microsoft has now belatedly released a solution to fix the problem for these machines, as well as those operating on its newer systems.

However, technology experts also speculate that the virus has been able to spread particularly virulently as many organisations have failed to apply the patches released by Microsoft to target the weakness. Microsoft released a statement today.

Somewhat ironically, the issue first became known in March when cyber weapons developed by the US National Security Agency were leaked.

Cyber opportunity

Cybersecurity is not just an issue that affects business or investors but one that affects society as a whole. It was even blamed for influencing the outcome of November´s US presidential election as cyber attackers were alleged to have infiltrated the US Democratic Party´s computer systems.

Against this backdrop, there is likely to be strong demand for effective cybersecurity solutions from both the public and private sector for years to come. Cybersecurity is a growth industry and will continue to be a source of investment opportunities.

Increased spending

A recent report by technology research firm Gartner forecast the global spend on information security to reach $90 billion in 2017, a 7.6% rise on 2016, and to scale the $113 billion mark by 2020.

Indeed, shares in firms specialising in cybersecurity solutions have already been seen to benefit from WannaCry as investors position themselves for increased spending in this area. Among the immediate beneficiaries as the impact of WannaCry emerged were shares in cybersecurity firms such as Sophos, Fireeye and F-Secure.

Shares in London-listed cloud security firm Sophos have risen by over 40% year-to-date.