State and local governments are increasingly becoming targets of cybersecurity attacks. There has been a notable increase in these cyberattacks with a 95% surge targeting the government sector worldwide in the second half of 2022, compared to the same period in the previous year. This rise in cybersecurity threats has raised concerns from various stakeholders, including leading rating agency S&P Global Ratings, which has identified cyberattacks as a growing credit risk to municipal bond issuers.
This increasing trend of cyberattacks because of the digitalisation of public securities not only threatens the digital integrity of the municipal bonds but also has significant financial implications. S&P Global Ratings has warned that weak cybersecurity could lead to credit downgrades over the next 12 months, putting the financial outlook of municipal bond issuers at risk.
Firm grasp of the new Securities and Exchange Commission (SEC) rules regarding cybersecurity disclosure is crucial. These rules are designed to minimise the risk to these bond issuers and investors alike. They should further serve to promote heightened security measures, keeping in line with the alarming increase in cyber threats.
The McGuireWoods LLP commentary on these matters provide further insight on this issue, available on JDSupra.
As we move forwards, it is clear that stricter cybersecurity measures are urgently needed and that governments must invest more in preventive measures and resources to combat these looming threats. Governments not only have a responsibility to protect their records and systems, but they also have an obligation to ensure the fiscal strength and stability of their bonds is not jeopardised by cyber threats. This issue underscores the importance of quality cybersecurity infrastructure in public financial systems today.