Understand how cyber governance is a more accurate risk management framework for shareholders, bondholders and senior management in the fast-moving era of corporate digital transformation
Cyber Governance Alert: GE
As a 1-Star-rated company, GE’s below average cybersecurity is notable considering the critical role technology plays across all of its business lines and its explicit recognition of security in support of digital transformation. Though in the past GE was considered the benchmark for a well-managed company, its multi-year restructuring is a cautious tale of ‘financial overengineering’.
Cyber Governance Spotlight: Honeywell
5-Star Honeywell’s (HON) best-in-class cyber governance is driven by its strong financials, rock-solid balance sheet and above average cybersecurity. It is a case of a very well-managed company that is also managing its cyber governance at a high level. HON management has placed its digital transformation strategy front and center, and this translates through to its financials, helping improve cashflow and margin expansion.
Rapid Response: Honda
Honda has been hit with a ransomware attack. Based on the financial impact to corporations hit with similar attacks, it is likely Honda will see a 13-19% incremental decline in operating margins due to increasing security-response costs and technology expenses related to fixing supply-chain disruptions. Like other 2-Star rated companies, Honda’s below average cyber governance (trending lower in the past 6 months) has been a warning for investors in the form a potential underperforming share price due to the company’s technology challenges.
Cyber Governance Spotlight: Ferguson
A well-managed company overall, FERG has executed effectively on its digital strategy and invested sufficiently in security to manage the downside financial risks associated with its increased digitization. Strong execution on e‑commerce, its customer sales and maintenance and back-end operations has yielded tangible benefits to the business, helping management deliver on key KPIs including solid margins. This has contributed to FERG’s 4-Star cyber governance rating (out of 5) on a regional basis and 5-Star rating on a relative basis among European industrials.
Cyber Governance Alert: IWG
In the wake of COVID‑19 and the global lockdown, IWG has lost two-thirds of its market value in the span of two weeks. Though it was considered to be in a strong position to take advantage of WeWork’s financial governance failure heading into 2020, the Cyberhedge cyber-financial model alerted us to the potentially negative impact of its weak cyber governance prior to the current market troubles.
Cyber Governance Alert: EON
EON’s poor cyber governance risks undercutting the post M&A financial benefits of its consumer solutions strategy. While COVID-19 disruptions are forcing all companies to re-evaluate many of their strategic priorities and plans, good cyber governance is a pre-requisite for EON to achieve its KPIs and position itself as the ‘holistic systems’ provider it seeks to become.
Cyber Governance Spotlight: Home Depot
Though Home Depot (HD) was caught up in the early COVID‑19 market turmoil, it is better positioned to weather the crisis thanks in part to consistently above-average cyber governance overall (4-star rating out of five stars) and a 5-star leader in its peer group. This takes on greater importance for a consumer staples company with a business-critical digital strategy that drives greater margins and improved productivity. HD was already well-along in the execution of this strategy before the lockdowns commenced—a strategy Cyberhedge views as a solid hedge against macro events such as COVID‑19 and a recession.
Cyber Governance Alert: Ryanair
Ryanair entered 2020 in decent financial shape relative to other low cost airlines. But in addition to the COVID‑19 disruption, poor cyber governance poses a risk to the company’s industry-leading operating margins, the key enabler for RYA’s aggressive pricing and thus market share growth post-COVID‑19.
Rapid Response: Marriott
Marriott customer data breach is a continuation of a concerning trend for the world’s largest hotel chain, which lacks the financial capacity to fix what is a structural problem, not a one-off incident.
Update to Cyber Governance Alert: Hertz
COVID-19-related travel disruptions are having a material impact on Hertz’s (HTZ’s) operations and financial position, as well as an increased likelihood of an operational problem related to its poor cyber governance.
Update to Cyber Governance Alert: Informa
COVID-19 disruptions to travel and global business operations are having a significant negative impact on Informa’s (INF’s) core customer events business and its financial position.
Update to Rapid Response: Travelex/Finablr
A cyber attack stopped Travelex’s operations. It never fully recovered due to lack of cash to respond. The COVID-19 pandemic will weaken many companies’ cash positions in the coming months, also resulting in an inability to adequately respond to cyber attacks.
Update to Rapid Response: Pitney Bowes
Cyber Governance Alert: Hertz
Rapid Response: Travelex/Finablr
Cyber Governance Alert: Macy's
Cyber Governance Alert: Rite Aid
Cyber Governance Alert: Informa
Cyber Governance Alert: United Technologies
Rapid Response: Pitney Bowes
Cyberhedge Research: Volume 2: September 2019
