Cyber War – Act II

By David Nelson, CFA CMT

Late Friday a massive Ransomware attack linked to Russia based REvil hit thousands of companies in more than 11 countries. The attack comes just weeks after a Biden warning to President Putin laying out 16 critical infrastructure sectors that are hands off. Cyber-attacks are quickly becoming the biggest threat world economies face perhaps even eclipsing the dangers of an increasingly belligerent China.

While the details of the attack and how to prevent it are the primary concern the overriding question still remains unanswered. At what point is an attack on industry and in turn the American people considered an ACT OF WAR?

Software firm Kaseya VSA appears to have been the initial target. Their services are used to update software at other firms. Upon learning of the breach, they shut down their servers but many of their customers use the software on their own. Unfortunately, it was passed on to their customers and the trickle-down effect traveled the globe hitting a wide variety of businesses.

In Sweden a popular grocery chain couldn’t open 800 stores. Here in the U.S. the number of companies affected appear to be in the hundreds and still counting. This is the second major attack linked to Russia based cyber criminals in less than two months. Most experts and government officials would concede another could happen at almost any time.

If the attacks go unanswered expect it to continue with increasing regularity. Decentralized like terrorist organizations I would expect they can operate in whatever country that lets them reside. Perhaps the tradeoff for Putin is quid pro quo. You leave me alone and we’ll look the other way.

The call from Washington will be for companies to shore up defenses certainly good news for cyber security firms like CrowdStrike (CRWD), Palo Alto Networks (PANW) and others. Football coaches often tell their teams; the best offense is a good defense. Maybe it’s time to turn that phrase upside down. The best defense is a good offense.

Surely these terrorists and I use that term deliberately should be thought of in the same way as any combatant. Justice should be applied in a war time mindset. What cyber and conventional offensive weapons do we have beyond the apparently useless diplomatic rhetoric?

While no one wants to start a war, I think it is safe to say that train has left the station. We are at war.