Cyber attacks threaten the financial stability of a company.
The steep, monetary burden of a cyber attack isn't exclusively tied to damaged digital assets, lost records, and the price of investigating and reporting a breach. Damage to an organization’s physical assets can be just as harmful.
The physical damage of a cyber attack typically occurs when a hacker accesses a computer system that controls equipment. Examples include technology-based controls in a manufacturing plant, refinery or electric generating plant. After a hacker gains access to an organization’s machinery, they control it.
These types of events can lead to major disruptions and costly damages. To safeguard physical assets, it’s critical for organizations to understand the types of businesses and assets that are exposed to these attacks.
What’s at Risk?
Let's compare a cyber attacks to a natural disaster or other industrial accident. Following these kinds of incidents, organizations can incur costs to repair and replace damaged equipment in addition to any lost revenue caused by the disruption.
Unlike natural disasters, however, cyber attacks that result in physical damage aren’t limited to a geographic location and can impact an entire network. This means damages caused by a breach can be widespread, affecting multiple sectors of the economy depending on the target.
Because of this, cyber attacks that cause physical damage are often dynamic and extensive. When an attack on critical infrastructure occurs, it not only affects business owners and operators, but suppliers, stakeholders and customers.
Who’s at Risk?
Cyber attacks that cause physical damage — including the targets, assailants, motives and means of the attack — are constantly evolving.
Incidents can occur in a variety of ways, including: phishing scams, internet exchange point attacks, breaches of unsecured devices and plots carried out by rogue employees.
Many experts deem power and energy sector organizations the most at risk. However, vulnerabilities also exist in utilities, telecommunications, oil and gas, petrochemicals, mining and manufacturing, and any other sectors where industrial control systems (ICSs) are used.
ICSs are open computer systems used to monitor and control physical processes as well as streamline operations and repairs. ICSs are not often designed with security as a primary consideration. This leaves them susceptible to attack. And, for many automated processes, attacks don’t even need to cause physical damage to result in significant disruption and losses.
The targets of cyber attacks vary greatly by industry, and the damage can be extensive due to the interconnected nature of ICSs.
Real-World Examples
Organizations are not always required to report cyber attacks, so they largely go unreported. However, here are a number of high-profile incidents that demonstrate how important it is to consider infrastructure cyber exposures:
→ Ukrainian power grid attack. This was a multisite attack that disconnected seven 110 kilovolt (kV) and three 35 kV substations. The attack resulted in a power outage for 80,000 people and lasted for three hours. The attackers caused substantial, prolonged disruption to the economy and general public utilizing a phishing scam.
→ Saudi Arabian computer attacks. Hackers destroyed thousands of computers across six organizations in the energy, manufacturing and aviation industries. A simple virus stole data and then computers were wiped and bricked. Not only did this mean critical business data was lost forever, but all of the damaged computers had to be replaced — a substantial fee for businesses of any size.
→ Petrochemical plant attack. This attack targeted a Saudi Arabian petrochemical plant. The unique attack wasn’t designed to steal data, but rather sabotage operations and trigger an explosion. The only thing that prevented an explosion was a mistake in the attackers’ computer code. Had the attack been successful, the plant would likely have been destroyed and many employees could have died. Experts are concerned that similar attacks could happen across the globe.
→ Hospital ventilation attack. In this incident, a hacker was able to control a hospital’s HVAC system using malware. This attack put the safety of staff, patients and medical supplies in jeopardy, as the hacker could control the temperature of the facilities.
Cyber attacks will likely become increasingly common, as technology advances and hackers become more creative. Even more concerning is that these kinds of attacks not only endanger a company’s data, reputation and finances, but human lives as well.
How Do I Protect My Organization?
Insurance coverage for cyber attacks is still in its infancy, and your organization may have gaps in protection. Even if your property insurance policy includes physical or nonphysical damage overages, you may not necessarily be covered from first- or third-party losses from cyber attacks.
The level of protection your company has depends largely on the structure of your policies. Therefore, it’s critical for businesses to do their due diligence and understand if their policies do the following:
→ Impose any limits on coverage, particularly as it relates to physical damage of tangible property.
→ Cover an attack and any resulting damages.
→ Provide contingent coverage for attacks that aren’t specifically targeted at the organization.
There are a number of steps businesses can take by themselves to protect their physical assets. In addition to implementing a cyber risk management plan, businesses should consider the following:
→ Keep all software up to date.
→ Back up files regularly.
→ Train employees on common cyber risks and what they should do if they notice anything suspicious.
→ Review your exposures and speak with your insurance broker to discuss policy options for transferring risk.
Contact Us
Have questions about today's newsletter or other commercial insurance matters? Contact a property and casualty client executive at The Plexus Groupe at 847-307-6100, or reach out via the Web.
Disclaimer and publishing credit: This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2018 Zywave, Inc. All rights reserved.