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The Ties That Bind: A Framework to Assess the Linkage Between Cyber Risks and Financial Stability
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The Ties That Bind: A Framework to Assess the Linkage Between Cyber Risks and Financial Stability

Author

Listed:
  • Healey, Jason

    (Columbia University, School of International and Public Affairs)

  • Mosser, Patricia

    (Columbia University School of International and Public Affairs)

  • Rosen, Katheryn

    (JP Morgan Chase)

  • Wortman, Alexander

    (DLA Piper LLP)

Abstract

Recent events have made clear that both the financial system and the networks of cyberspace are inherently complex, fragile, and interdependent. This paper contributes to the growing literature on cyber risks to the financial system by presenting a high-level analytical framework to guide analysis of how a cyber-attack could cause financial instability and how financial system fragilities might be targeted by cyber attackers. The framework outlines linkages between the two sectors, particularly those which might cause contagion across the financial system. If a firm or market wants to understand systemic cyber risks in the financial sector, then conducting integrated analysis of how the various systems (technology, back office, business and financial decisions) interact and propagate shocks collectively is key. The paper is divided into four main sections: cyber risks, financial stability, the “transmission channels” by which cyber risks can induce financial turmoil, and the amplifiers and dampeners which shift the balance of risks. An appendix provides a sample set of questions designed to assist with implementation of the framework for a specific market, financial infrastructure or sector.

Suggested Citation

  • Healey, Jason & Mosser, Patricia & Rosen, Katheryn & Wortman, Alexander, 2021. "The Ties That Bind: A Framework to Assess the Linkage Between Cyber Risks and Financial Stability," Journal of Financial Transformation, Capco Institute, vol. 53, pages 94-107.
    • Handle: RePEc:ris:jofitr:1670
    as

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    Citations

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    Cited by:

    1. Rustam Jamilov & Hélène Rey & Ahmed Tahoun, 2021. "The Anatomy of Cyber Risk," NBER Working Papers 28906, National Bureau of Economic Research, Inc.
    2. José Ramón Martínez Resano, 2022. "Digital resilience and financial stability. The quest for policy tools in the financial sector," Financial Stability Review, Banco de España, issue Autumn.
    3. José Ramón Martínez Resano, 2022. "Digital resilience and financial stability. The quest for policy tools in the financial sector," Financial Stability Review, Banco de España, issue Autumn.
    4. José Ramón Martínez Resano, 2022. "Digital resilience and financial stability. The quest for policy tools in the financial sector," Revista de Estabilidad Financiera, Banco de España, issue Otoño.

    More about this item

    Keywords

    Financial stability; cybersecurity; systemic risk; risk management;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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