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Over the last decade, technology has been one of the best-performing sectors of the global economy, significantly outperforming major global indices, including during the most recent March downturn. The rise of technology has been driven by the shift in the way consumers operate in their daily lives, as businesses and the global economy increasingly move online.
COVID-19 and Cybersecurity
The structural shift online looks set to continue as millions of people adjust to living and working from home due to the COVID-19 outbreak. In an attempt to ‘flatten the curve’, consumers, businesses and governments around the world have had to rapidly change how and where they operate.
Globally, 50% of employees now find themselves working outside their main offices two and a half days per week1, and one study estimates 25% – 30% of employees will be working from home multiple days a week by the end of 20212.
Companies coined ‘stay-at-home stocks’ have, as a result, seen a dramatic increase in the use of their products and services over recent months. Netflix reportedly has seen a surge of new subscribers to its streaming service, with an additional 15.8 million users over the first quarter of 2020, exceeding forecasts by 8.6 million3. Similarly, Zoom, the US-based online video conferencing service, saw daily active users jump from 10 million to over 200 million between December 2019 and March 20204.
However, as a result of our world expanding virtually, do we also find ourselves more exposed to new risks?
There is no doubt online criminals are acutely aware of the increased opportunities to take advantage of remote workers in the current situation. Since the end of February, there has reportedly been a 667% increase in the number of spear-phishing attacks (a personalised email sent to targeted users to trick them into sharing sensitive information)5.
To support these attacks, many cybercriminals have started websites which specifically relate to the pandemic – from January through to April, the number of domain names containing ‘corona’, ‘virus’ and ‘covid’ has soared (see graph below). Over that same period, of the COVID-19 related domain names registered globally, 3% were found to be malicious and an additional 5% suspicious.6
Figure 1: Domain names registered between 7 January 2020 and 4 April 2020
Companies such as Crowdstrike (a California-based cybersecurity company specialising in cloud-based endpoint security) have also seen a growing number in sophisticated attacks since February. These online attacks such as ‘Mummy Spider’, first observed in January, use COVID-19 as a lure, while posing as government health organisations in order to distribute, and trick users into downloading and installing, harmful malware. With an increase in cybercrime looming, we find ourselves looking for even more protection.
As businesses require employees to spend more time online, their reliance on software companies to bolster firewalls increases. Businesses are presented with new challenges for IT and cybersecurity infrastructure to ensure employees are able to continue to operate remotely, particularly for those using personal devices to store and handle sensitive information and access remote services from home Wi-Fi networks. Cisco, for example, is reported to have seen a tenfold increase in the number of requests to provide security support to remote workforces over the first few weeks of March7.
The cybersecurity sector
According to AustCyber, the global cybersecurity market is predicted to grow by 86% from US$159B in 2019 to US$270B by 20268, driven primarily by users purchasing products and services from external cyber security providers. The global pandemic has accelerated the need for businesses to have robust cybersecurity measures in place, which, coupled with the structural shift towards an online economy could prove to be the catalyst for expansion in an already rapidly-growing industry.
Figure 2: Global cybersecurity spend
Cybersecurity: How to get investment exposure
The cybersecurity industry in Australia is small and underdeveloped relative to global standards. However, investors looking to gain exposure to the companies best positioned to benefit from long-term structural growth and capitalise on the current tailwinds can consider an ETF such as the BetaShares Global Cybersecurity ETF (ASX: HACK). HACK currently holds 45 of the leading global cybersecurity companies from around the world, including Crowdstrike and Cisco, who are at the forefront in the fight against cybercrime. From inception9 to 30 April 2020, HACK has outperformed the broad global shares benchmark (MSCI World) by 5.5% p.a., which includes outperformance of ~10% in the year to date10.
1. Sentonas, Michael. “Cybersecurity & COVID-19: Keys to Securing a Remote Workforce.” CrowdStrike, 11 Mar. 2020, www.crowdstrike.com/blog/securing-a-remote-workforce-in-the-time-of-covid-19.
2. Analytics, Global Workplace. “Work-at-Home After Covid-19—Our Forecast.” Global Workplace Analytics, globalworkplaceanalytics.com/work-at-home-after-covid-19-our-forecast. Accessed 6 May 2020.
3. Roettgers, Janko. “Netflix Earnings: Huge Lockdown Subscriber Bump.” Protocol, 21 Apr. 2020, www.protocol.com/tech-earnings-q1-2020-protocol-guide-netflix.
4. Reuters Editorial. “Zoom Pulls in More than 200 Million Daily Video Users during Worldwide Lockdowns.” U.S., 2 Apr. 2020, www.reuters.com/article/us-health-coronavirus-zoom/zoom-pulls-in-more-than-200-million-daily-video-users-during-worldwide-lockdowns-idUSKBN21K1C7.
5. Shein, Esther. “667% Spike in Email Phishing Attacks Due to Coronavirus Fears.” TechRepublic, 26 Mar. 2020, www.techrepublic.com/article/667-spike-in-email-phishing-attacks-due-to-coronavirus-fears.
6. Mahadevan, Prem. “CYBERCRIME Threats during the COVID-19 Pandemic.” Globalinitiative.Net, 1 Apr. 2020, globalinitiative.net/wp-content/uploads/2020/04/Cybercrime-Threats-during-the-Covid-19-pandemic.pdf.
7. Scheer, Steven. “Mass Move to Work from Home in Coronavirus Crisis Creates Opening for Hackers: Cyber Experts.” U.S., 19 Mar. 2020, www.reuters.com/article/us-health-coronavirus-cyber/mass-move-to-work-from-home-in-coronavirus-crisis-creates-opening-for-hackers-cyber-experts-idUSKBN2153YC.
8. “AUSTRALIA’S CYBER SECURITY SECTOR COMPETITIVENESS PLAN 2019 UPDATE.” AustCyber.Com, AustCyber, www.austcyber.com/resource/australias-cyber-security-sector-competitiveness-plan-2019. Accessed 19 Dec. 2019.
9. Inception date of HACK is 30 August 2016.
10. As at 30 April 2020. Past performance is not indicative of future performance.