A cyberattack can cause a large manufacturing organization in Asia Pacific huge losses: Study

A cyberattack can cost a large manufacturing organization in Asia Pacific an average of USD 10.7 million in economic loss with customer churn being the largest economic consequence of a cyber breach, resulting in USD 8.1 million of indirect cost, according to a Frost & Sullivan study commissioned by Microsoft. For mid-sized manufacturing organization, the average economic loss was USD 38,000. Furthermore, cybersecurity incidents have also led to job losses across different functions in more than three out of five (63%) manufacturing organizations. 

While the impact of data vulnerabilities and breaches can be costly and damaging to the manufacturing organizations, its supply chain and consumers, the study uncovered that half (51%) of the manufacturing organizations in Asia Pacific had either experienced a security incident or were not sure if they had had a security incident as they had not performed proper forensics or data breach assessment.

The study further revealed that instead of accelerating digital transformation to bolster their cybersecurity strategy to defend against future cyberattacks, almost three in five (59%) manufacturing organizations across Asia Pacific had delayed the progress of digital transformation projects due to the fear of cyberattacks. Delaying digital transformation not only limits the capabilities of manufacturing organizations to defend against increasingly sophisticated cyberthreats but also prevents them from leveraging advanced technologies, such as artificial intelligence (AI), cloud, and the Internet of Things (IoT), to dramatically increase productivity, empower their workforce and deliver new service lines. 

These findings are part of “Understanding the Cybersecurity Threat Landscape in Asia Pacific: Securing the Modern Enterprise in a Digital World” study launched in May 2018. The findings aim to provide business and IT decision makers in the manufacturing sector with insights on the economic cost of cyberattacks and to help to identify any gaps in their cybersecurity strategies.

The initial study surveyed a total of 1,300 business and IT decision makers ranging from mid-sized organizations (250 to 499 employees) to large-sized organizations (>than 500 employees), of which 18% belong to the manufacturing industry.

In calculating the cost of cyberattacks, Frost & Sullivan created an economic loss model based on the insights shared by the respondents. This model factors in two kinds of losses which could result from a cybersecurity breach:

• Direct: Financial losses associated with a cybersecurity incident including loss of productivity, fines, remediation cost, etc; and
• Indirect: The opportunity cost to the organization such as customer churn due to reputational damage.

“The frequency and severity of cyberattacks targeting manufacturing organizations have increased significantly in recent years, underscoring the need to protect the ever-growing volume of data generated by and made available to manufacturing organizations,” said Kenny Yeo, Industry Principal, Cyber Security, Frost & Sullivan. “By integrating security into every digital process and physical devices, manufacturing organizations can not only mitigate the loss of intellectual property (IP) and customer data but also minimize downtime as well as remediation cost resulting from cyberattacks.” 

Key Cyberthreats and Gaps in Manufacturing Organizations’ Cybersecurity Approaches

For manufacturing organizations that have encountered a security incident, data exfiltration, ransomware and remote code execution are the biggest concern as these threats have the highest impact and often result in the slowest recovery time:

• Remote code execution is a unique threat that manufacturing organizations face, and it poses a grave threat to these companies as cybercriminals can remotely access and control their operations. This allows malicious actors to disrupt production and sabotage the business.
• As manufacturing organizations need to adhere to tight schedules and strict deadlines, a ransomware attack -- where cybercriminals encrypt files to restrict users' access until a ransom is paid -- can lead to production downtime and loss of customer confidence. Manufacturing organizations not only lose time and resources in dealing with the aftermath of the attack, but the entire supply chain will also be disrupted too.

Aside from external threats, the study also uncovered several key cybersecurity gaps in manufacturing organizations:

• Complex security environment impeding recovery time: Contrary to the common notion that more security solutions will lead to greater efficiency, a large portfolio of cybersecurity solutions may not be a good approach to bolster cybersecurity. The complexity of managing a large portfolio of cybersecurity solutions may lead to longer recovery time from cyberattacks.

  The study showed that nearly three in five (57%) manufacturing organizations with 26 to 50 cybersecurity solutions took more than a day to recover from cyberattacks. Conversely, only 26% of organizations with less than 10 solutions took more than a day to recover. In fact, 35% of them managed to recover from a security incident within an hour.  

• Traditional tactical viewpoint towards cybersecurity: Despite the growing sophistication and impact of cyberattacks, the study revealed that majority of the respondents (41%) hold a tactical view of cybersecurity – “only” to safeguard the organization against cyberattacks. While only one in five (19%) viewed cybersecurity as a business differentiator and an enabler for digital transformation.
• Security as an afterthought: If cybersecurity is not seen as an enabler for digital transformation, it will undermine manufacturing organizations’ ability to build a “secure-by-design” digital project, leading to increased vulnerabilities and risks.

The study revealed that only 26% of manufacturing organizations who had encountered cyberthreats considered a cybersecurity strategy prior to initiating a digital transformation project. The remaining respondents either thought about cybersecurity only after the commencement of their digital transformation projects or did not think about cybersecurity at all.

“Technology advances and innovations in intelligent manufacturing are delivering game-changing breakthroughs for leading businesses in every sector,” said Scott Hunter, Regional Business Lead, Manufacturing, Microsoft Asia. “As manufacturing organizations focus on increasing data-driven products and services to differentiate themselves in the global economy, building and maintaining trust within their ecosystem of partners and customers becomes an even bigger priority.” 

“Cyber attackers are constantly looking for opportunities, so the more businesses know about their techniques and tradecraft, the better prepared they will be to build defenses and respond quickly. Building organizational resilience and reducing risk by adopting a security approach that includes prevention, detection and response can make a huge difference in the overall cybersecurity health of a manufacturing organization,” he added.

Bolstering Cybersecurity Using Artifical Intelligence

AI plays a critical role in manufacturing organizations as they increasingly rely on machine learning automation to increase their efficiency and output by scale while reducing cost and downtime through predictive maintenance. AI is also a powerful tool that can enable manufacturing organizations to defend themselves against increasingly sophisticated cyberattacks. The study revealed that 67% of manufacturing organizations in Asia Pacific have either adopted or are considering an AI-based approach to improve their security posture. 

Cybersecurity solutions that are augmented with AI and machine learning capabilities can autonomously learn what is normal behavior for connected devices on the organization’s network, and swiftly identify cyberthreats at scale through the detection of behavioral anomalies. Cybersecurity teams can also put in place rules that block or quarantine devices that are not behaving as expected before they can potentially damage the environment. These AI-powered cybersecurity engines enable manufacturing organizations to address one of their largest and most complex security challenges as they integrate thousands or even millions of IoT devices into their information technology (IT) and operational technology (OT) environments. 

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