With the latest hacking headlines surrounding the world’s largest meat producer, JBS, we look at the theme of Cyber Risk in our ESG Safeguard platform, and find that while it is practically impossible to predict a hack, looking at the overall Social and Governance scores of a company provides a fair indication of their exposure to risk.

By
Sam Leavitt
|
June 4, 2021

ESG Spotlight: Linking Cyber Risk to Social and Governance Scores

Article
ESG Spotlight: Linking Cyber Risk to Social and Governance Scores

Over the past year we have seen increased activity and an evolution in the world of Cyber Risk. What used to be data breaches at the consumer level, to target personal information like credit cards and Social Security numbers, has evolved into something larger in scale that companies still are unprepared for. We used our ESG Safeguard platform to cover Cyber Risk after the SolarWinds (SWI) hack in January, and more recently in April after the Ubiquiti (UI) data breach. Ransomware attacks carried out by gangs that operate in countries like Russia and North Korea have become more frequent and dangerous due to the increased reliance on cloud and internet usage during the pandemic. Hackers have taken advantage of vulnerabilities stemming from the decentralized nature of companies and their increased investment in technical infrastructure without increased cybersecurity.

In this most recent case from Monday, the ransomware attack on the world’s largest meat producer JBS (JBSAY) caused the company to shut down operations around the globe.

Cyber Risk a Social and Governance Challenge for JBS, Others

Companies like JBS are very much susceptible to cyber attacks because they have poor Governance and Social track records to begin with, they are decentralized, and they have a diversity of operations around the world. They are not alone in the food industry. As we see from analysis, Governance scores for the food products sector are fairly low, most recently due to the Cyber Risk subtheme.

ESG Safeguard Platform: Food Products Governance, Past 365 Days

While it is practically impossible to predict a hack, looking at overall Social and Governance scores of a company is a fair indicator of their exposure to risk. The global pandemic was a good stress-test for the meat industry, and its ability to respond to unforeseen events, and they did not do well.

From the very onset of the pandemic, JBS has had numerous COVID outbreaks at their plant locations and are still facing legal challenges from events that occurred nearly a year ago. Tyson (TSN) has also faced public tribulations of a similar nature with workplace safety and mismanagement at a corporate level. In fact, the CEO of Tyson resigned on Wednesday after less than a year on the job, largely attributed to the aforementioned handling. Cyber attacks on large corporations have the added result of impacting global supply chains and the interests of national security.

Only a few weeks ago, the Colonial Pipeline, which supplies gas to a large portion of the Eastern United States, was hit in a ransomware attack. The company confirmed that they did indeed pay the $4.4 million ransom to the hackers after being shut down for nearly a week.

Cybersecurity Threats, Now Industry Agnostic

Currently, the United States only has cybersecurity regulations in place for companies in the nuclear, electricity, and banking industries. In the wake of the Colonial Pipeline hack, President Biden announced an Executive Order to increase cybersecurity that focused on five key areas to address these oversights in the long run. As the economy opens back up, demand has already put pressure on meat producers like JBS, and the already tangled supply chain does not need further impediment in the form of cyber attacks. Although the stoppage in meat production should only be temporary, it is clear that traditional targets, like software companies, are no longer the sole potential victims of cyber attacks, and that all companies need to be prepared for what lies ahead.

Join our Upcoming Webinar: How to Win at ESG Investing by Ditching Generic ESG Data

RSVP today to join our special guests Jean Rogers, Founder of the Sustainability Accounting Standards Board (SASB) and one of the world’s leading ESG experts, alongside Bruno Bertocci, Managing Director of the Sustainable Equity Investors Team at UBS Asset Management. They will discuss why it’s crucial for the analyst community to include next generation ESG data and second-order information as part of an effective investment strategy.

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.