Will cybersecurity weather the recession? | SOC Prime Blog

Will cybersecurity face the recession?

Disclaimer: This is not financial advice.

Si vis pacem, para bellum – If you want peace, prepare for war. This ancient wisdom is once again proving its accuracy amid global supply chain reorganization, rising defense spending and likely recession.

Interestingly, as tech companies take losses and resort to layoffs, cybersecurity companies are seeing positive momentum in the face of uncertainty. So is this the case when the worse it is for everyone, the better it is for the cyber sector?

The above statement turned out to be correct during the Great Recession of 2008 [1]. At the same time, the threat landscape has grown significantly over the past few years. Total malware production rate increased from 6,368 malware per month in 2005 [2] to more than 17 million per month in 2022 [3].

80% of companies plan to increase or maintain technology spending over the next year

CEOs are increasingly reassessing their spending and putting their strategic plans on hold. Bloomberg’s [4] A survey conducted before Russia’s invasion of Ukraine shows that 87% of respondents said cybersecurity was an important concern over the next 3-5 years, 53% saw an increase in threats and 80% of businesses planned to increase or maintain their technology spending. over the next year.

Another mid-year survey [5] shows that only 9% of respondents believe that the war in Ukraine will not have a significant impact on their business. Meanwhile, 90% are worried about associated cyberattacks and 76% either expect a recession or believe it is happening now. Digital transformation remains a top priority for 58% of respondents. This is why it is possible to suggest that companies will continue to improve their cyber defenses, also considering the heightened risks of post-pandemic remote culture and new SEC rules on cybersecurity disclosure. [6]. As a result, the confidence of cybersecurity companies is somewhat visible in the latest stock market trends.

Even this month, the cybersecurity industry has been sheltered from industry-wide market losses [7]. However, a global economic slowdown calls for additional precautions.

The fall in nominal interest rates after 2008 fueled what is known as the “capital strategy” [8], an irrationally exuberant approach in search of unprecedented profits. Technology was one of the sectors that attracted a lot of money and, unfortunately, the one where some companies recently lost their valuation the fastest (the very technology-oriented NASDAQ, plunging 29% [9]), following the sharp drop in IPO markets in early 2022 [10].

The largest market capitalization is represented by Palo Alto Networks with $52.3 billion and CrowdStrike Holdings with $43 billion.

You might be wondering why we included defensive stocks in the comparison. The reason is simple. The companies you see above are actively working in cyber defense. They could reap slow but steady profits from long-term government contracts amid rising tensions. The example below shows a fairly obvious uptrend.

Example: Lockheed Martin and Raytheon growth momentum from late 2021 to early 2022. Notice how the price increases with the development of the war in Ukraine.

Source: https://finbold.com/three-defense-stocks-that-delivered-double-digit-gains-for-investors-in-2022/
Source: https://finbold.com/three-defense-stocks-that-delivered-double-digit-gains-for-investors-in-2022/

The Bureau of Economic Analysis will release an advance estimate of gross domestic product [11] for the 2nd quarter of 2022. If they confirm a downward movement in the GDP assessment for the 2nd consecutive quarter, it will officially mean a recession.

This event could cause companies to increasingly reduce their expenses. However, surveys show that leaders still recognize that cybersecurity budgets are a high priority. Typically, they do not plan to cut cyber defense budgets significantly, as this could lead to undesirable consequences, such as increased exposure to threats and non-compliance with regulations. These could be the main reasons for the economic resilience of the cybersecurity industry during a recession, resulting in positive stock market momentum.

Although the cybersecurity sector has been more resilient to the recession than other technology industries, it still needs to take a strategic approach to the sustainable development of the IT industry. Security should be an integral part of digital infrastructures, not an insurance policy. As this downturn approaches, finance leaders will demand smarter spending from their teams, exploring options that potentially deliver more value while saving money. Access to Detection Platform as Code of SOC Prime saves hundreds of hours researching and coding rules, while deployment automation and technical support optimize security operations workflow efficiency.

[1] A Not-So-Common Cold: Malware Statistics in 2022, DataProt, 9 May 2022, https://dataprot.net/statistics/malware-statistics/. Accessed July 6, 2022.

[2] Evolution of Malware: 2005, Safe List, 8 February 2006, https://securelist.com/malware-evolution-2005/36070/. Accessed July 6, 2022.

[3] Rush, Howard, et al., Online crime. Cybercrime and Illegal Innovation, NESTAJuly 2009

[4] Webb, Alex. Cybersecurity a likely focus for tech spending, say CTOs, Bloomberg.com, April 8, 2022, https://www.bloomberg.com/news/articles/2022-04-08/cybersecurity-a-likely-focus-for-tech-spending-ctos-say#xj4y7vzkg. Accessed July 6, 2022.

[5] Poll: Global C-Suites are feeling the strain of war in Ukraine, with most CEOs now predicting recession and fears of escalating cyberattacks, PR Newswire, June 17, 2022, https://www.prnewswire.com/news-releases/survey-global-c-suites-feel-the-strain-of-war-in-ukraine-with-most-ceos-now-predicting -recession-and-fears-of-escalating-cyber-attacks-301570328.html. Accessed July 6, 2022.

[6] Modi, Kruti, SEC proposes new cybersecurity disclosure rules – WSJ, The Wall Street Journal, 13 April 2022, https://deloitte.wsj.com/articles/sec-proposes-new-cybersecurity-disclosure-rules-01649771802. Accessed July 7, 2022.

[7] Here are some of the tech stocks taking the biggest losses, The hill, 24 May 2022, https://thehill.com/policy/technology/3499555-here-are-some-of-the-tech-stocks-taking-the-biggest-losses/. Accessed July 6, 2022.

[8] Janeway, William H., and Robert Johnston, Capital Is Not a Strategy by William H. Janeway, Project union, 6 January 2022, https://www.project-syndicate.org/commentary/attracting-nontraditional-capital-is-not-a-business-plan-by-william-h-janeway-2022-01?barrier=accesspaylog . Accessed July 6, 2022.

[9] Daniel, Will and Taylor Locke, The market crash in 2022 looks like a dot-com 2.0 crash. Next recession? Fortune, 22 May 2022, https://fortune.com/2022/05/22/why-crypto-tech-stocks-crash-recession-dotcom-bubble/. Accessed July 6, 2022.

[10] Go Paul, EY Q2 2022 Global IPO Trends EY, 29 June 2022, https://www.ey.com/en_gl/ipo/trends. Accessed July 6, 2022.

[11] Broadcast Schedule | US Bureau of Economic Analysis (BEA), Economic Analysis Office, https://www.bea.gov/news/schedule. Accessed July 6, 2022.