Pirates without Borders: The Propagation of Cyberattacks through Firms’ Supply Chains

Abstract

We document the propagation effects through supply chains of the most damaging cyberattack in history and the important role of banks in mitigating its impact. Customers of directly hit firms saw reductions in revenues, profitability, and trade credit relative to similar firms. The losses were larger for customers with fewer alternative suppliers and suppliers producing high-specificity inputs. Internal liquidity buffers and increased borrowing, mainly through bank credit lines at higher rates due to increased risk, helped affected customers to maintain investment and employment. However, the shock led to persisting adjustments to the supply chain network.

Fintech: what’s old, what’s new?

“…However, the potential fallout from a large-scale cyberattack on systemically important financial institutions cannot be underestimated. Indeed, recent literature confirms that cyberattacks can generate financial spillovers and consequently have systemic risk (Crosignani et al, 2020). Accordingly, there are large social benefits of regulators working towards the incorporation of cyberattack scenarios into stresstesting exercises, as well as on the design of appropriate contingency plans and infrastructures in collaboration with the financial sector (Duffie and Younger, 2019;Kashyap and Wetherilt, 2019).…”

Energy Resilience Impact of Supply Chain Network Disruption to Military Microgrids

“…Single node Deliberate attack Insider threat [111] Cyberattack [112] Terrorist attack [113] Logistics delay Inclement weather [114] Transportation accident [115] Port congestion [116] Multi-nodal Natural disaster Hurricane [117] Earthquake [118] Wildfire [119] Material shortage Trade tariffs [120] Shipping route blockage [121] Civil unrest [122] Financial crisis Market volatility [123] Economic recession [124] Global pandemic [125] As such, there has been significant literature regarding the ripple effect and its consequences across various domains [109]. Gholami-Zanjani et al [126] assessed its effect on the food industry as a basis for location-allocation and inventory-replenishment decisions.…”

When It Rains, It Pours: Cyber Risk and Financial Conditions

“…Researchers have studied the frequency of cyber attacks and how they may be mitigated by bank lending (e.g. Aldasoro et al, 2020b;Crosignani et al, 2021). Existing work tends to treat cyber incidents and financial conditions as independent factors, or looks only at how cyber incidents may negatively affect financial conditions.…”