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Governments grappling with heightened volatility, insecurity and complexity are having to do more to protect populations and their wealth.
Insecurity is becoming the new normal. Cyber risks are emerging as a major threat, and nations are scrambling to protect their populations and their wealth. Our increasingly connected world means that it has become possible for unwanted actors to infiltrate and compromise nuclear power stations, electricity grids and traffic lights – and perhaps even democratic elections and referenda.
And as we increase those connections through technological advances such as the «internet of things» (IoT), there’s more potential for nearly everything to be hacked – be it government databases or your fridge or microwave.
How are Organisations Responding?
As technology continues to evolve, many organizations have increasingly moved away from isolated, manually controlled «operational technology» (OT) systems to an environment in which physical processes are controlled with sophisticated and interconnected information technology (IT) equipment.
Put simply, as more devices become «smart» through wireless connectivity, OT systems that once required hands-on manipulation – such as adjusting a valve or flipping a switch – can now be controlled remotely. And many of these OT systems are becoming part of an organization’s critical infrastructure.
Take NASA, the US-based National Aeronautics and Space Administration. Its OT systems are used to test rocket propulsion systems, control and communicate with spacecraft, and operate ground support facilities. They are also associated with the electrical power, heating and cooling systems, and other supporting infrastructure1.
While the convergence of IT and OT can lead to cost savings and other efficiencies, it also means OT systems are potentially vulnerable to the types of security challenges more common to IT systems, including malicious hacking. In short, integrating OT with IT will have a great impact on network structure and will force companies to think of a more effective way to protect their network.
With the addition of new connected devices, the surface of attack will increase tremendously – and any new device connected will be an entry point for an attacker.
What Else Should Investors Know?
Catalysts such as 5G embody a quantum leap in capability for the connected economy, unlocking the potential of the «Internet of Things» (IoT) by connecting everything from manufacturing machinery to domestic appliances with unprecedented speed and capacity.
McKinsey estimates that the «Industrial IoT» (IIoT) market will grow by 12 percent per year until 2025, reaching a market size of 500 billion dollars2. As we enter a new phase in the evolution of cybersecurity, the drivers that underpin this evolution – digitalization, innovation, regulation, and globalization – are largely the same.
What is different, however, is the pace of change at which these drivers can accelerate and disrupt growth in markets and companies. There will always be companies that will miss the next opportunity and go from innovator to legacy provider – the infamous «technology trap» that has ensnared many, not least the likes of Kodak or Nokia.
Furthermore, the shift from perimeter-based IT security to the cloud has brought about completely different challenges and associated technologies. For the savvy investor, staying up-to-date with the latest innovations and being curious about where cybersecurity is headed is essential.
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All investing involves risk, including the risk of capital loss. This material is provided for informational purposes only and should not be construed as investment advice, or a recommendation or an offer to buy or to sell any security, or an offer of services. Investors should consider the investment objectives, risks and expenses of any investment carefully before investing. The views and opinions expressed are as of the date indicated and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted. In Switzerland: This material is provided by Natixis Investment Managers, Switzerland Sàrl, Rue du Vieux Collège 10, 1204 Geneva, Switzerland or its representative office in Zurich, Schweizergasse 6, 8001 Zürich. Thematics AM is an affiliate of Natixis Investment Managers. THEMATICS ASSET MANAGEMENT A French société par actions simplifiée (simplified joint-stock company) with a share capital of 191,869 €843 939 992 Paris Corporate and Trade Register. Approved by the Financial Market Authority (AMF in its French acronym) under number GP 19000027. 20, rue des Capucines – 75002 Paris www.thematics-am.com
