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The True Cost of Cybercrime in the Manufacturing Sector: Impact, Case Studies, and Mitigation

Ransomware is a rapidly growing threat causing the cost of cybercrime to US manufacturing to extend far beyond financial losses. As more manufacturing companies embrace digital transformation, they expose themselves to vulnerabilities in their IT and operational technology (OT) systems. The economic impact of cyberattacks on this industry includes direct costs from ransom payments, lost productivity, disrupted operations, and reputational harm, alongside indirect costs such as regulatory fines and increased security expenses.

This article explores the cost of cybercrime in the manufacturing sector, highlighting specific examples from the United States and outlining strategies manufacturers can adopt to mitigate these risks.

1. The Financial Burden of Cybercrime on Manufacturing

Manufacturers face considerable financial losses from cyberattacks. According to a recent report by IBM, the average cost of a data breach in the manufacturing industry is approximately $4.24 million. Costs associated with cyber incidents include:

Direct Financial Losses: Immediate costs such as ransom payments and recovery expenses can quickly amount to millions.

Operational Downtime: Attacks on critical systems can halt production, leading to significant losses in productivity and delayed orders.

Legal and Compliance Costs: Manufacturers may face fines for breaches that expose customer or supplier data, particularly under regulations such as GDPR and CCPA.

Reputational Damage: Customer trust and brand reputation can suffer after an attack, potentially resulting in lost contracts and diminished market share.

Security Costs: Companies often face increased costs for enhanced cybersecurity measures and insurance following a breach.

2. High-Profile Cyberattacks on U.S. Manufacturers

Several recent cyber incidents in the United States reveal the devastating impact of cybercrime on manufacturing:

Norsk Hydro (2019): Although Norsk Hydro is based in Norway, its U.S. operations suffered from a ransomware attack that disrupted production for days, costing the company nearly $50 million. The attack impacted IT systems and OT environments, forcing the company to switch to manual operations temporarily.

Honda (2020): A cyberattack on Honda’s U.S. manufacturing systems halted production at several plants. The attack, reportedly carried out by a ransomware group, caused significant downtime and affected Honda’s ability to meet market demand. While Honda did not disclose exact figures, such disruptions likely resulted in millions of dollars in lost productivity and recovery costs.

JBS USA (2021): The world’s largest meat supplier, JBS, fell victim to a ransomware attack that forced the company to shut down plants across the United States. JBS paid an $11 million ransom to resume operations, highlighting the high-stakes nature of attacks on critical manufacturing infrastructure.

Kaseya Supply Chain Attack (2021): Although Kaseya itself is not a manufacturer, the ripple effects of the attack impacted numerous U.S. manufacturers who relied on its IT management software. This supply chain attack affected thousands of companies, underscoring the vulnerabilities in interconnected manufacturing supply chains.

3. Why the Manufacturing Sector is Vulnerable

Several factors make manufacturing particularly susceptible to cybercrime:

Convergence of IT and OT Systems: The integration of IT systems with OT creates vulnerabilities, as OT systems were not originally designed with cybersecurity in mind.

Complex Supply Chains: Manufacturers rely on a web of suppliers, making them vulnerable to third-party risks from compromised partners or software.

Aging Infrastructure: Many manufacturers still use legacy systems that are difficult to secure, making them attractive targets for cybercriminals.

Industry 4.0 Adoption: As manufacturers move toward digital and automated processes, including the Internet of Things (IoT) and robotics, they introduce additional entry points for attackers.

 

4. The Indirect Costs of Cybercrime in Manufacturing

While direct costs such as ransom payments and repair expenses are substantial, the indirect costs of cybercrime are equally significant:

Supply Chain Disruptions: A cyberattack can halt operations for days, leading to delayed shipments and disrupted supply chains. These disruptions create ripple effects, affecting downstream customers and other suppliers.

Customer and Partner Trust: Breaches can erode trust with clients and partners who expect secure handling of proprietary information.

Increased Insurance Premiums: After a cyberattack, companies may face higher insurance premiums or additional costs for cyber insurance.

5. Mitigating Cyber Risks in Manufacturing

Manufacturers can protect themselves from cybercrime by adopting a multi-layered security approach, leveraging advanced technologies, and ensuring ongoing employee training. Here are a few best practices:

Do no overlook full System Recovery: Having a regular backup schedule for application data is commonplace for most organizations, but many overlook the steps needed to achieve full system recovery in the event of a disaster or cyberattack. Physical systems are inherently more time consuming to recover following an incident, especially if systems need to be recovered to dissimilar hardware. Cristie Software recovery solutions can overcome these challenges with advanced automation features, reducing recovery times and eliminating user intervention.

Invest in Endpoint Protection and Network Monitoring: Protecting endpoint devices and continuously monitoring network traffic can help detect anomalies early, enabling rapid response to potential threats.

Adopt a Zero Trust Model: Zero Trust requires all users and devices to be authenticated and authorized continuously, minimizing risks from compromised credentials.

Segment IT and OT Networks: By separating IT from OT environments, manufacturers can reduce the chances of a single attack spreading across both systems.

Regular Security Audits and Penetration Testing: Conducting routine security assessments can help identify vulnerabilities before attackers exploit them.

Employee Training on Phishing and Social Engineering: Employees are often targeted through phishing emails and other tactics; regular training can improve awareness and reduce the chances of successful attacks.

Looking Forward: Strengthening Resilience in Manufacturing

As cyber threats continue to grow, the manufacturing sector must prioritize cybersecurity alongside other operational needs. With cybercriminals becoming more sophisticated and targeting critical industries, investment in cybersecurity and system recovery is not just a defensive measure but a strategic imperative. By adopting stronger security practices, manufacturers can better protect their operations and maintain resilience in the face of evolving cyber threats. Investing in cybersecurity is essential to safeguarding the future of manufacturing and ensuring the industry can continue to innovate without the shadow of cybercrime undermining its progress.

Contact the Cristie Software team for advice on protecting your manufacturing operations with Cristie Software’s advanced system recovery and replication solutions. Our software integrates seamlessly with top backup vendors like IBM, Dell Technologies, Rubrik, and Cohesity but it can also operate as a standalone system recovery solution.

Cristie Software Ltd

New Mill, Chestnut Lane
Stroud, GL5 3EW
United Kingdom

©2024 Cristie Software Ltd. Registered in England & Wales Number: 06395450
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