The impact of cybercrime, from stolen personal data to business attacks, is massive and rising.
A report by McAfee and the Center for Strategic and International Studies says cybercrime costs the world’s economy $600 billion a year. Other estimates from cybersecurity experts put the total much higher, and say it could reach $6 trillion by 2021.
Technology is being used to both perpetrate and defend against cyber threats. Raj Lala, President and CEO of Evolve ETFs, explains how investors can respond.
1. Why did Evolve decide to launch CYBR, Canada’s first cyber security exchange traded fund?
Lala: Cybercrime is going to increase, therefore the demand for cyber security services should follow suit. There is serious growth opportunity in this space. CYBR provides investors with that opportunity, by investing in global companies that are involved in the cyber security industry.
2. What types of companies are in the CYBR portfolio?
Lala: There are companies like Palo Alto and Symantec that people may have heard of, but also companies that may not be known to many because they work in the background, like Checkpoint. CYBR invests in companies that provide hardware, software and consulting services to many Fortune 500 companies. Organizations simply don’t have the human capital to deal with this size of an undertaking, so they work with the types of specialized companies that we have in the CYBR portfolio.
3. Who should consider investing in a cyber security ETF?
Lala: Anyone who thinks the need for cyber security is going to continue. The value of an ETF is to take a more diversified approach, so this allows investors to be exposed to the market without having to pick just one company. It could also add diversity to the technology equity bucket if people are looking to broaden their exposure to technology stocks outside of social media or hardware manufacturer companies.
4. How much is cyber security spending expected to increase?
Lala: About $100 billion is being spent on cyber security services, and that’s expected to grow at about 20 per cent a year. And while it seems like a lot, it’s a drop in the bucket compared to what’s being lost due to cybercrime. I doubt you will ever hear a CEO say, even after a bad financial quarter, “We need to cut back on our cyber security spending”. It’s just too important, and it’s really a non-discretionary spend.
5. We are living in a hyper-connected world now, from our personal devices to the Internet of Things. How vulnerable is everyone to cybercrime?
Lala: There is just so much connectivity. Currently, there are 20 billion devices connected to the internet, and that number is expected to grow to 50 billion by 2020. There is going to be so much more opportunity for cybercriminals to hack into our lives, whether they be personal or corporate. Today we have attacks executed by more sophisticated cybercriminals, and these are only going to increase. Every second, 12 people online become victims of cybercrime, totalling more than 1 million victims around the world every day.
6. What are the top three cyber security challenges facing CEOs?
Lala: I saw an interesting statistic recently from the IBM X-Force Threat Intelligence Quarterly, which stated that the majority of cybercrime comes from an internal source. So I’d say that’s number one. Companies now need to be concerned about internal threats as well as external threats. Next would be the shortage of human capital to help fend off and deal with cybercrime. And lastly would be trying to stay ahead of cybercriminals.
7. How has the increase in cybercrime changed the way businesses conduct themselves?
Lala: With increased threats comes increased awareness of their impact. More companies are recognizing cyber security as an area of the utmost importance, which needs attention and serious investment. Once a company has a breach or is hacked, you’ve effectively lost customer confidence and trust. Every CEO out there wants to avoid that scenario and is most likely putting money behind protecting their business and increasing shareholder value.
CYBR invests primarily in equity securities of companies located domestically or internationally that are involved in the cyber security industry through hardware and software development. Learn more at evolveetfs.com/CYBR
This content was produced by The Globe Content Studio. The Globe and Mail’s editorial department was not involved.
Commissions, management fees and expenses all may be associated with an investment in the exchange traded funds managed by Evolve ETFs (the “ETFs”). The prospectus contains important detailed information about the ETFs. Please read the prospectus before investing. This communication is intended for informational purposes only and is not, and should not be construed as, investment and/or tax advice to any individual.