The Dark Web: Australia’s Cyber Threat | #government | #hacking | #cyberattack


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Aside from various handouts, the May budget included beefed up spending on cyber security. Which listed companies are focused in this area?

-Australian government spending $10bn on cybersecurity
-Cybercrime costing an estimated $42bn per annum in Australia
-ASX-listed exposures limited to small cap companies

By Nikhil Gangaram

Earlier this year, the Australian Federal Government released its annual budget packed with sugar, spice and all things nice.

Given that it is an election year, newspaper headlines were filled with the prospects of higher wages, hopes of inflation vanishing and a slashing of the fuel excise.

Despite these sweet promises, a glossy fact seems to have been overlooked by many pundits.

In addition to these particulars, the budget also revealed Australia’s largest ever cybersecurity spend, with the government pledging approximately $10bn to bolster Australia’s cybersecurity and intelligence capabilities.

Cyberwarfare getting SPICY

The federal government’s plan to splurge heavily on the cybersecurity sector was no overnight decision.

As part of a 10-year plan, the government initially established its Cyber Security Strategy in 2020, with the ultimate goal of ensuring online security for individuals, businesses and essential services.

The initial strategy involved investing $1.67bn over ten years, however the additional spending laid out in this year’s budget will see the Government implement Project REDSPICE.

REDSPICE is an acronym for Resilience, Effects, Defence, Space, Intelligence, Cyber and Enablers. The ambitious project aims to build new national cyber and intelligence resources and drastically improve the Australian Defence Force’s (ASF’s) current cybersecurity capabilities.  

In its Cyber Security Strategy prospectus, the Australian government highlighted several reasons for the heavy investment in the sector.

The document cited the ever-increasing scale and sophistication of cyber security threats as Australians become increasingly reliant on the internet and the internet-connected devices. The increased capacity and speed of 5G networks also presents an opening for these trends to proliferate.

This ever-changing environment has been enhanced by the covid-19 pandemic. More Australians are now working from home, using the internet for healthcare, education, entertainment and online shopping.

As organisations adapt to these hybrid work models by migrating to the cloud, third party software-as-a-service providers will become larger targets. As a result, many business leaders in Australia have identified cyber hazards as a key threat to business growth.

A survey of 600 global executives by consulting behemoth Deloitte reported that almost 75% of Australian businesses experienced as many as 10 cyber incidents or breaches over the last year.

According to the UNSW Institute for Cyber Security, cybercrime alone was estimated to cost Australia up to $42bn last financial year. In addition, a survey from PWC’s Digital Trust Insights 40% of Australian businesses plan to increase their cybersecurity headcount this year.

Never before have we witnessed such high demand for cybersecurity resources, with the cyber industry in Australia expected to grow to a $7.6bn market by 2024. As a result, the prudent investor will be curious on how they can hack the cybersecurity boom.

Cyberboomers

Australia boasts a relatively broad, be it nascent, cybersecurity sector. In 2020 there were approximately 350 providers with more than 40% of these companies founded within the past five years.

In terms of market share, Data#3 ((DTL)) is one of the largest in Australia, with the company providing a variety of IT services and solutions.

Despite a lacklustre performance in the tech sector, Data#3 has been a strong performer this year capitalising on large-scale digital transformation projects.

This was reflected in the company’s impressive first-half results for FY22, with Data#3 delivering a 16% bump in revenue of $999.3m and a 32% increase in net profit after tax.

Despite its diminutive market capitalisation, Tesserent ((TNT)) has been on the forefront of cyber defence.

The company provides a range of internet security services for the education, manufacturing, insurance, legal, finance, logistics and government markets.

Tesserent’s flagship Cyber 360 strategy specialises in identifying and assessing threats, risks and taking corrective action.

Another local player is ArchTIS ((AR9)), a data focused security company that aims to prevent malicious and accidental loss of information for its clients.

The company’s platforms NCProtect and Kojensi have been approved by multiple government bodies in providing secure access and sharing sensitive and classified information.

Demand for these services were reflected in the company’s last quarterly report, with licencing revenue surging over 1,100% from the previous corresponding quarter.

Whitehawk ((WHK)) is another ASX listed player boasting a global cybersecurity presence.

Although the company’s market capitalisation is relatively nascent, Whitehawk’s online products are tailored for small and medium size businesses to fight cybercrime, fraud, and disruption.

According to its latest quarterly report, Whitehawk invoiced US$1.2m in the September quarter, collecting US$880K receipts from customers. In its preliminary final report, the company has also flagged a 180% lift in annual revenues to US$3.4m.

For investors looking for exposure to leaders in the global cybersecurity sector, BetaShares Global Cybersecurity ETF ((HACK)) provides an attractive option. The ETF boasts global cybersecurity giants such as Okta, Crowdstrike, and Palo Alto Networks.

The new age

For years the US has been painting worst-case scenarios akin to a ‘cyber-Pearl Harbour’.

The recent conflict between Russia and the Ukraine has shed new light on the potential of global cyber warfare. As a result, many Australians will be welcoming the government’s recent investment into intelligence and cybersecurity.

With the Internet of Things, the sector has many tailwinds in its favour as users and their devices become ever more interconnected.

Cyber security itself is a constant game of cat and mouse, as one side builds a better, more sophisticated weapon, the other is forced to adapt or perish. As a result, the sector represents an ongoing narrative of new innovations in technology, presenting great potential in growth.

However, although it may be easy to be wooed by high growth rates, investors should also note several headwinds faced by the sector.

Regulation and legislation represent key roadblocks as the government and companies try to marry new innovations with user privacy. In addition, the high rate of new entrants in an ever changing industry could make it harder for investors to pick a clear winner.

It is also important to note that the pockets of potential cyber adversaries run very deep, and the quest to remain ahead of cyber threats can make many companies obsolete.

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