Cyber crime costs global business 'hundreds of billions' says McAfee

Cyber espionage and intellectual property theft have led to 500,000 lost jobs in US alone

The cost of cyber crime and cyber espionage could amount to as much as $100bn every year with some 500,000 lost jobs in the US alone, according to a new report by security software vendor McAfee and the US Center for Strategic and International Studies. (CSIS)

The report, titled ‘The Economic Impact of Cyber Crime and Cyber Espionage,' was compiled with the aid of economists, intellectual property experts and security researchers.

"Losses to the US (the country where data is most accessible) may reach $100bn annually. The cost of cyber crime and cyber espionage to the global economy is some multiple of this likely measured in hundreds of billions of dollars," reads the report, which classified malicious cyber activity into a number of different areas.

The $100bn in estimated losses include intellectual property theft, cyber crime, the loss of sensitive business information, service disruptions as the result of a cyber attack, the costs of recovery post-security breach and damage to reputation of the hacked organisation.

The research also suggests that many businesses underestimate the risks they face from hackers and cyber criminals, and that that this can ultimately affect trade and competitiveness.

"Some companies believe that the damage from espionage is tolerable, part of the cost of doing business in the world's fastest growing markets, and that they can 'run faster', to create new technologies and so minimise any loss," says the report.

"But illicit technology transfer, even if the technology is dated by US standards, accelerates military modernisation," it continues.

"It accelerates improvements in indigenous industrial and technological capabilities, making the recipient better able to absorb stolen technology in the future and produce competitive products.

"Companies risk losing not just their strategic advantage, not just intellectual property, but also customer lists, their competitive analyses and sales data."

The report also suggests that cyber crime can lead directly to job losses as affected organisations often have to deal with the loss of trade and revenue as a result of an attack. This, in turn, leads to less economic activity if laid-off employees aren't able to find work that matches their previous wage; or worse, no work at all.

It also suggests that cyber espionage could lead to job losses in the US if the stolen information helps overseas companies.

"The greatest damage and risk from malicious cyber activity may not be in terms of direct damage to the victim country, but the illicit benefit obtained by the acquiring country, whose economic development and ability to compete globally (economically and perhaps militarily) are increased and accelerated through illegitimate means," says the report.

"This report connects malicious cyber activity with job loss," said James Lewis, director and senior fellow, Technology and Public Policy Program at CSIS, and co-author of The Economic Impact of Cyber Crime and Cyber Espionage.

"Using figures from the Commerce Department on the ratio of exports to US jobs, we arrived at a high-end estimate of 508,000 US jobs potentially lost from cyber espionage.

"As with other estimates in the report, however, the raw numbers might tell just part of the story," he continued, warning that cyber attacks could lead to jobs ultimately moving abroad.

"The effect of the net loss of jobs could be small, but if a good portion of these jobs were high-end manufacturing jobs that moved overseas because of intellectual property losses, the effect could be wide ranging," Lewis concluded.

Recently, another McAfee report found that social media malware is on the rise, as hackers attempt to exploit new ways of conducting cyber espionage.