Can Stronger Cyber Defense Boost America’s GDP?

#fintech #healthtech #security

_SUBHEADING: Cyber threats cost our economy Billions. This article provides data and information gained from my work and how better cyber-defence can increase U.S. economic output. _

Have you ever wondered if cyber-security is just cost or growth to the U.S. economy. During my years providing advice financial institutions and healthcare providers I witnessed how cyber events slow investment, increase costs, erode trust and prevent growth. In this article I present some research and experience on the value of investments in Cyber-Defence as part of the economy, share some latest data, and show possible pathways to align the reality of more robust security to increased GDP

The Size of Investment and Threat
According to McKinsey & Company the global cybersecurity market was approximately US$200 billion in 2024 and is expected to be growing at ~12.4 percent per year between 2024-2027. At the same time, global estimates of the damages from cybercrimes are expected to rise and reach about US$10.5 trillion per year by 2025. While the U.S. specific numbers on the effect on the GDP are limited, one source was quoted as estimating that malicious cyber-activity cost the U.S. economy US$57 billion to US$109 billion in 2016. These figures reveal threats scale and investment scale are both high - which prompts the question of whether there is some strategic correlation between cyber-defence and economic performance.

How Better Cyber Defense Can Boost the GDP
When organizations invest in cyber-security, they decrease business disruption, avoid loss of customer trust, prevent regulatory fines and accelerate digital innovation - all of which help productivity. For example, investment in digital infrastructure (i.e. data-centers) has been associated with quantifiable increases in GDP: J.P. Morgan estimated that investment in data centers could raise US GDP by 0.1-0.3 percent in 2024-25. Although data-centers are not an example of cyber-security specifically it can be seen the principle applies: investment in safe digital infrastructure as a basis for growth.

From my past job I noted that the firms which treated cyber-security as enabler (not just firewall) launched new digital services sooner and entered new markets faster and thus contributed more to GDP - linked output.

Hence stronger cyber-defence can have three economic effects:
These are solutions previously offered by the Darwinian Era: Protecting digital productivity so that it is not lost to breaches or downtime.

Enabling innovation in digital services which drive higher value added output.
The Clean Energy Package should also put price and scale on the significant costs that are created by the resulting drag from remediation, regulatory cost and loss of trust which otherwise subtract from economic output.

Estimating impact
Given that US$25 trillion is about US$25 trillion and assuming that better cyber-defense could reduce the economic drag associated with cyber incident-loss by say 0.2-0.5 % per annum, that is a potential boost of US$50-125 billion per annum. If organizations make the cyber-investments and if the incremental productivity adds even 0.1 % of GDP - it equals to US$25 billion. Given the massive investment growth (US$200 Billion+ globally now), coupled with huge damage potential, it makes economic sense to position cyber-defense as a strategic lever of growth.

One of the most pragmatic models is cost-benefit approach in cybersecurity economics literature, that is, invest today to avoid bigger losses tomorrow. (For example, in the Gordon Loeb model that says optimal investment does not exceed ~37of expected loss. Therefore, matching investment decisions to impact - on GDP, but not on breach-count - is key.

Policymaking and Business Recommendations
Instead, these referents have claimed that: "To suggest that cyber security should be managed to mitigate risk alone is insufficient - it must be approached urgently as an economic infrastructure."

Encourage public-private investment programmers to link Cyber-defense and the digital economy growth.
And to that, they added: "We recommend using such metrics as productivity-loss avoided or GDP-contribution enabled in measuring cyber-investment."
"Pulling on past priorities, firm strategic advice and investors should include: "Tailoring investment frameworks for investment in sectors with high economic multipliers (finance, health, retail, infrastructure);
Improve transparency: gather and publish data regarding the impact of cyber incidents, investment and returns in order to render macroeconomic modelling possible.

Conclusion:
Stronger cyber-defense in America is not only a technological concern; it is a growth driver for the economy. By being able to protect digital productivity, enable innovation and reducing the loss-drag from cyber-incidents we can lift part of our GDP. From my experience the firms that invest smartly not only survive threats - but they also create value and help the economy grow. If you are a business leader, a policymaker, or someone working in tech then ask yourself; how much growth could your organization enable if it was a strategic rather than reactive approach to security? Let us invest today to ensure and build our digital economy of tomorrow.

DECLARATION AS AUTHOR
I say on this article that it is my original work, putting my thoughts to paper from my research, professional experience and public data sources and that all the materials referenced are listed in this article.