Empirically Evaluating the Effect of Security Precautions on Cyber Incidents

Abstract

Empirical evidence that connects firm investment in cybersecurity defenses to the likelihood of being attacked has been very hard to come by. The Israel National Cyber Directorate (INCD) and the Israeli Central Bureau of Statistics (CBS) recently surveyed Israeli firms about their ICT operations including cyber defenses and attacks. Using the survey, in this paper, we empirically examine whether security precautions adopted by firms do in fact reduce the chances of being attacked. We find that for ‘large” firms with significant revenues using ecommerce and cloud services (the riskiest firms), employing 18 out of 20 security precautions (covered by the survey) rather than 13 security precautions reduces the probability of experiencing a cyber incident from 81% to 58%. Using an alternative measure for security, we find that for ‘large” firms with significant revenues using ecommerce and cloud services, using all six basic security precautions reduces the probability of experiencing a cyber incident from 80% to 42%.

Keywords: cybersecurity, precautions, empirical

JEL Classification: B21, D22