While Fortune 1000s dominate many interactions in our daily lives, small businesses remain the bedrock of the U.S. economy. According to the Small Business Administration, the 30 million small businesses operating in the United States employ nearly half of the total workforce.
\nUnfortunately, these same small businesses have begun to fall victim to cyberattacks at an alarming rate, and whether you know it or not, this reality is putting the entire economy at risk. As large companies spend endless amounts of time and money to fortify their digital assets, cybercriminals, hackers and fraudsters have turned their attention to those that cannot afford such lofty and impenetrable defenses: small and mid-sized businesses.
\r\nA recent Ponemon study found that nearly 70% of all small businesses experienced a cyberattack in 2017, while half admitted to having no understanding of how to protect their company against an attack. And that's a big problem when considering the average recovery costs of a data breach for a small company can top $149,000. Most worrisome, however, is that 60% of all small companies that succumb to a cyberattack go out of business within six months, according to a report by the U.S. National Cyber Security Alliance.
\r\nThe risk to individual small businesses is undoubtedly a big concern to small business stakeholders, but perhaps the bigger issue at present is the risk now posed to the national economy as a whole.
\r\nTo date, there has been little to correlate small business cyberattacks to any indicators of recession.
\r\nWhile there is vast and differing discussion on when and what will truly facilitate the next downturn, most, if not all economists, have failed to identify SMB cybercrime as a factor. That's likely because recessions are typically driven by events that trickle down throughout society, such as rising interest rates, credit crunches, international conflict or high oil prices, among other geopolitical activities.
\r\nWhile those contributing factors remain, unquestioned recession drivers, it is entirely plausible that the next recession is driven from the bottom up and not the top down. As the aggregate of attacks on small businesses continues to cause disruption to business continuity, significant revenue losses, employee layoffs and permanent closures, the net negatives could realistically bubble up into the mainstream. This trickle up the depressive state would almost certainly hamper consumer confidence, slow GDP, halt risk-taking and decimate job growth so much so that the next great recession is born.
\r\nHarvard Business Review suggests that a cyberattack could cause the next financial crisis if it were to cause disruption to financial services capabilities, especially payment systems. While a crisis like this could start from the top, it could also start from the bottom. If thousands of small and mid-sized businesses were forced to shut their doors from cyberattacks, it could lead to a decline in deposits that significantly hurts a bank's ability to lend, among other consequences.
\r\nIn addition, as noted in Inc., which tracks small business openings and growth in its Entrepreneur Index, when small businesses close or fail to thrive, they drag down job numbers and job growth with it. When that happens, both consumers and small businesses spend less, which trickles up the line to larger businesses and the whole economy.
\r\nAccording to an article in Nextgov, \"the U.S. economy loses between $57 billion and $109 billion per year to malicious cyber activity.\" Such numbers are poised to worsen as the economy begins to factor in all of the small business losses from cybercrime.
\r\nAs economists point to the inevitability of recession, it's essential that all of society help small businesses from emerging as a contributing factor. Here are three things that we can, and must, do right away:
\r\nEnabling cybercrime to flourish and fester among small businesses pushes our country's risk of recession up to the ladder and unnecessarily drains billions from the global economy. While economists will continue to pontificate about the state of the economy and what's likely to drive the next recession, they must not forget the present-day fragility of the small business community and how unprepared it is to defend against the plethora of cyberattacks. For this very reason, it is entirely possible that the damages from small business cybercrime facilitate or play a major role in leading to the next great recession.
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