The latest domino to fall due to hacking exposure has been Ubiquiti (UI), the lowest scoring company in Technology Hardware Equipment in the past two weeks. We unpack recent developments in the Cyber Risk theme as seen on our ESG Safeguard platform and how other companies like Microsoft mitigated fallout in the market by being transparent with their cybersecurity breach.

Sam Leavitt
April 9, 2021

ESG Spotlight: Cyber Risk Problem Grows for Large and Small Firms

ESG Spotlight: Cyber Risk Problem Grows for Large and Small Firms

In January the SolarWinds (SWI) story took the media by storm as it affected several significant companies and high levels of the U.S. government. However, the problem of Cyber Risk continues to be a pervasive issue for companies large and small. Check Point Research reported a 9% monthly increase in organizations that have been impacted by ransomware attacks since the start of 2021. In our January article on Cyber Risk we used our ESG Safeguard platform to show how company responses to these events are key to mitigating data exposure and protecting shareholders from financial fallout.

ESG Safeguard Platform: Technology & Hardware Equipment Sentiment, Past 2 Weeks

January was also when Ubiquiti (UI), a tech hardware provider of routers and security cameras, was hacked. They initially disclosed the breach as a security issue with a third party cloud provider and notified users to change their passwords. That was the extent of the breach in the company statement and their stock price continued to grow at a steady rate in the ensuing months.

However, just last week a whistleblower came forward to Brian Krebs Security blog pointing out that Ubiquiti’s hack was much more damaging than originally stated, and that the company actively covered up the severity of it. When asked about the recent developments Ubiquiti did not deny it and admitted that the company itself was hacked as opposed to the third party they identified in January. The stock price dropped over 25% in the ensuing days, and the extent of the damage remains unclear due to the lack of transparency on the company’s part.

ESG Safeguard Platform: Event Counts and Stock Price, 2021

Same Event, Different Outcomes

Although experiencing a recent service outage that could be attributed to Cyber Risk, Microsoft has been upfront and forthcoming with details into their outage. Furthermore, their stock price has not suffered and even experienced a 4% gain in the past week.

What becomes clear is that we have two separate events surrounding the same hack with two very different stock outcomes. In January when Ubiquiti’s hack was disclosed and the company appeared to take the right steps, the stock price was largely unaffected. Last week, the event didn’t change, the hack still happened months ago, but the perception regarding Ubiquiti’s response and awareness had been irrevocably changed. Stronger measures like a more robust reset of user credentials and accounts at the onset of the hack in January in conjunction with better transparency may have saved the company reputation and financial position in the long run.

Companies don’t have as much control over preventing hacks as we would like, but they do have control over controlling the narrative. How they respond to events when they do occur in order to mitigate data exposure and maintain trust with their users is material to financial outcomes as we’ve seen here, and has a lot to do with leadership within the company.

Interested running these types of analyses with our ESG platform?

Request an ESG demo today to find out how you can analyze earnings call transcripts and other financial documents with our text analytics platform. Spot outliers, identify critical insights, and understand key drivers.

About Amenity

Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.

This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.

Copyright ©2021 Amenity Analytics. 

Get even more Insights with our Newsletter

Stay informed of market impacting events through the lens of NLP and learn about our latest offerings.