The Banking Executive Magazine - August 2024 Issue

CrowdStrike is one of the global top cybersecurity companies. The up- date to the Falcon software triggered a malfunction that disabled parts of the computer systems and software like Microsoft Windows. Three days after the incident, CrowdStrike re- ported that a significant number of the devices are back online and op- erational. THE COST OF THE GLOBAL IT OUTAGE The health care and banking sectors were the hardest hit by CrowdStrike’s global IT outage, with estimated losses of $1.94 billion and $1.15 bil- lion, respectively. Fortune 500 airlines such as Ameri- can and United were the next most affected, losing a collective $860 million. The outage may have cost Fortune 500 companies as much as $5.4 bil- lion in revenues and gross profit, not counting any secondary losses that may be attributed to lost productivity or reputational damage. Only a small portion, around 10% to 20%, may be covered by cybersecurity insur- ance policies. Fitch Ratings, one of the largest United States US credit ratings agen- cies, said that the types of insurance likely to see the most claims stem- ming from the outage include busi- ness interruption insurance, travel insurance and event cancellation in- surance. According to Fitch rating agency, this incident highlights a growing risk of single points of failure. Single points of failure are likely to increase as companies seek consolidation to take advantage of scale and expert- ise, resulting in fewer vendors with higher market shares. The eye-popping damage estimates underscore how a preventable mis- take at one of the world’s most dom- inant cybersecurity firms has had cascading effects for the global econ- omy and may prompt more calls for CrowdStrike to be held accountable. IMPACT ON BANKING AND FINANCIAL SECTOR Microsoft and CrowdStrike stocks fell as a result of the outage. Crowd- Strike's stock fell more than 11% on 19 July, although Microsoft stock was down less than 1%. Banks that were affected included Chase, Bank of America, Wells Fargo, U.S. Bank, Capital One and Charles Schwab in the US, RBC and TD Bank in Canada, Capitec Bank and other South African banks, and several banks in the Philippines, in- cluding RCBC, Metrobank, Land- Bank, BDO, UnionBank, BPI, and PNB. E-wallets such as Maya and GCash also experienced problems in the Philippines. The website and mobile banking application of DenizBank in Turkey could not be accessed. Visa was affected. Numerous Singaporean companies, including Singapore Ex- change (SGX) and DBS Bank, re- ported various levels of service difficulties. In India, the Reserve Bank of India said that only 10 banks and NBFCs were affected by the outage. In Arab countries, few banks use CrowdStrike tools and many banks' critical systems do not run on the cloud. Hence, most Arab banks were unaffected. The London Stock Exchange, while operating normally, was unable to push news updates to its website. Towards a Universal Ecosystem ISSUE 188 AUGUST 2024 the BANKING EXECUTIVE 9