Rising cyber-attacks to Small and Medium Businesses( SMB or SME) and cyber security requirements

SMEs contribute to more than one third of GDP in emerging and developing economies and account for 34% and 52% of formal employment respectively. SMEs and young firms that experience rapid growth can have a considerable impact on employment creation and productivity growth, including through innovation, heavy investments in human capital, new demand for advanced products and services, knowledge spill-overs that other enterprises can harness, and impact on local entrepreneurial ecosystems, according to OECD report. Established medium-sized enterprises that innovate and scale up are the driving force behind growth in many OECD economies, often ensuring the coordination, upgrading and participation in supply chains of smaller suppliers.

Digital technologies enable SMEs to improve market intelligence and access distant markets and knowledge networks at relatively low cost, and stronger participation in international activity can boost SME growth. Many small businesses host a website, conduct business over email, allow for online or credit card payments, or even offer free Wi-Fi access to customers in their office locations.

However, increased digitization has exposed small / medium businesses to cyber threats. In their 2018 Data Breach Investigations Report, Verizon found that 58% of all cyberattacks target small businesses. While it is true that the ultimate reward might not be as high as from a multinational organization, cybercriminals go after SMBs because they are easier to penetrate.

Researchers at Warwick Business School have found that security breaches have a lasting impact on organizations, with breached companies typically paying lower dividends and invested less in research and development up to five years after the attack. Daniele Bianchi, assistant professor of finance at Warwick Business School, said: “Firms that suffer a data breach do not typically respond by firing the management, but by investing more in the existing CEO. At first sight, these results may look puzzling. However, they are consistent with the idea that the average response is to invest more in the management to address possible structural flaws, as well as maintaining the integrity of the firm in response to the reputational damage it has suffered. In the long run security breaches appear to have a more significant impact on firms’ strategies and policies than their cash flow.” While operating performance recovered after a cyber-attack, these companies tended to invest less in research and development and paid lower dividends over the next five years as they sought to manage the financial risks caused by data breaches.

When a multinational or global company is attacked, the cost can be astronomical whereas, according to the Ponemon Institute, the average cost for small businesses to clean up after being hacked is about $690,000 and, for middle market companies, it is over $1 million. The cybersecurity industry has also shown enterprise bias by targeting superior solutions and services to large enterprises who have deep pocketbooks and experienced staff.