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Putting Cybercrime in Perspective

Putting Cybercrime in Perspective

January 30, 2014
By Mae Kowalke, TMCnet Contributor
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Aside from serving as a good plot device for the film industry, what is the real effect of cybercrime on the world? A recent McAfee (News - Alert) white paper highlights some of the very real costs of cybercrime, both to businesses and the economy as a whole.


Identity theft, more common now than ever, is one of the most profitable forms of cybercrime. It generates roughly $1 billion in revenue per year on a global basis, according to McAfee, and it costs the U.S. about $780 million each year.

This is a big loss, but it goes largely unnoticed because financial institutions do not make a big deal of the issue. In an industry where profit margins can be plump, such losses are generally regarded as part of the cost of doing business online.

Online fraud is another form of cyber crime that is quite costly. According to a survey by InternetRetailer.com, online fraud cost retail businesses roughly $3.5 billion in 2012. Anti-fraud measures have helped cut such fraud from 1.8 percent in 2004 to 0.9 percent in 2012, but the cost remains high.

Another cost, somewhat harder to quantify, is the loss of intellectual property by cybercriminals. Because such theft is not zero-sum, when criminals steal such information it does not immediately show up as lost revenue.

But the cost is still huge. If a company spends a billion dollars on a product and it is a flop because competitors already have a similar product on or soon to be on the market, this can make the value of such intellectual property investment nearly zero.

“One interview with intelligence officials told of a US furniture company being hacked and losing its IP, only to see furniture made from its designs being offered online wholesale,” noted the McAfee paper. “There are similar stories involving efforts to use cyber techniques in attempts to acquire breakfast cereal recipes, running shoe designs, automobile part technologies, and soft drink formulas.”

It added: “These are not ‘strategic industries,’ but their losses from cyber espionage can still be significant.”

Another cost of cyber crime comes from reputation damage. A company’s stock price can drop 5 percent or more after reports that their customer databases have been hacked. While much of this stock price often is recovered eventually, it can substantially disrupt firms and hinder their ability to perform optimally.

Then there is the cost of warding off such dangers. It must be done, as this article has shown, but it sure is not free. One estimate of global spending on IT security put the figure at $60 billion per year, and growing at about 8 percent per year.

Defense is not cheap. But the cost of not defending against cybercrime is even worse.




Edited by Blaise McNamee

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