A new report posits that cybercrime costs the U.S. economy $100 billion per year.

McAfee engaged the Center for Strategic and International Studies (“CSIS”) to build an economic model and methodology to accurately estimate these losses, which can be extended worldwide.

To help measure the real loss from cyber attacks, CSIS enlisted economists, intellectual property experts, and security researchers to develop the report. The general accepted range for cybercrime launch was between $100 billion and $500 billion to the global economy. Researchers used real-world analogies like figures for car crashes, piracy, pilferage, and crime and drugs to build out the model. They noted the difficulty of relying on methods such as surveys because companies that reveal their cyber losses often cannot estimate what has been taken, intellectual property losses are difficult to quantify, and the self-selection process of surveys can distort the results.

For purposes of the research, CSIS classified malicious cyber activity into six areas:

  • The loss of intellectual property,
  • Cybercrime,
  • The loss of sensitive business information, including possible stock market manipulation,
  • Opportunity costs, including service disruptions and reduced trust for online activities,
  • The additional cost of securing networks, insurance and recovery from cyber attacks, and
  • Reputational damage to the hacked company.

“We believe the CSIS report is the first to use actual economic modeling to build out the figures for the losses attributable to malicious cyber activity,” said Mike Fey, executive vice president and chief technology officer at McAfee. “Other estimates have been bandied about for years, but no one has put any rigor behind the effort. As policymakers, business leaders, and others struggle to get their arms around why cyber security matters, they need solid information on which to base their actions.”

Lewis and co-author Stewart Baker of Steptoe & Johnson LLP pointed out that the dollar amount might not fully reflect all the damaging effects that cyber espionage and cybercrime have on the economy. Lewis and Baker said the larger effect may be more important than any actual number, and it will be the focus of the next report.