S&P Hints at Rating Downgrades for Poor Cyber… Again
Standard & Poor’s (S&P) continues to warn financial institutions that poor cyber risk management practices may lead to ratings downgrades. The credit ratings agency released a report stating that credit analysis “may give consideration” to systemic cyber risks and entity-specific cyber risks.
Institutions unprepared for cyberattacks affect several risk criteria—management and governance assessments, capitalization, risk management, and, in extreme cases, funding and liquidity, S&P analysts led by Irina Velieva noted in the report.
The agency’s analysis will now include assessments of cyber risk management policies and frameworks, cyber-risk awareness and employee trainings, and cybersecurity budgets of financial institutions.
S&P has previously issued cybersecurity warnings but has not integrated cyber risk insights in its credit ratings. In a September 2015 report led by Stuart Plesser, the agency highlighted “cybersecurity as an emerging threat that has the potential to pose a higher risk to financial firms in the future, and possibly result in downgrades.”
Other ratings firms have been active in efforts to integrate cyber risk quantification technologies. This month, Moody’s announced a $25 million follow-on investment into VisibleRisk, a cyber risk ranking platform that emerged from Moody’s 2019 venture with Tel Aviv-based cybersecurity venture firm Team8. In April, Fitch Ratings announced a partnership with SecurityScorecard to assess cyber-risk exposure “across a broad set of institutions, beginning with banks.”