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A New Kind of Risk
Thursday, July 28 2011 | 08:52 AM
NEWOAK CAPITAL LLC
|While the global markets are preoccupied with how to account for obvious risks such as breaching the US debt ceiling, Greece default and their domino effects. There are many risks that are not even in the minds of many investors let alone being priced-in by the markets.
There is a real risk of potential cyber attacks targeting companies or attempting to paralyze the global financial systems as a whole to achieve radical political goals. The recent Sony and Lockheed cyber attacks illustrate the degree of vulnerability of even some of the most technologically advanced companies. Given the lack of comprehensive models of cyberspace and absence of general appreciation of the overall financial markets’ vulnerability to a widespread attack, investors don’t seem to be so much focused on the risks and pricing that in their valuation. Just the fear of it will create regulatory, operational and legal risks that will cost companies a great deal in both capital and management distraction. We are far from fully understanding and pricing of cyber attack risks and the possible implications for the overall global markets.
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