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Could Digital Supplier Networks Spur Cyber Warfare?

Feature Article | July 7, 2016 by Kai Goerlich

Cyberwar, the dark side of the networked society, is a reality and a new battle front. This can be easily seen as the United States, for example, openly uses this technique to fight enemies including the Islamic State.

Of course, this is just one of many such attacks, as China, Russia, Israel, UK, Iran, and North Korea engage in this practice, according to the World Economic Forum (WEF).

Every military strategist knows that the simplest way to destabilize a nation is to disrupt its economy. For the most part, financial markets operate mainly through trust. By deliberately creating uncertainty by manipulating the currency value; increasing the volatility of resources such as oil, gas, minerals, and food; or destabilizing world trade, a financial crisis can be created. Although this approach could possibly backfire, given the global state of financial systems, we may have seen it already happen in Ukraine and Georgia, according to the WEF.

If cyberwar, cybercrime, and an increasingly networked society are already a reality, it is reasonable to expect strategic economic battles that attack supply chains, competitors, or other strategic markets.

The Digitized Supply Chain

To impact the complete supply chain of a country or region, the opposition must have two things:

  • Full digitization of the supply chain
  • Gaps in the network that are prone to a cyber attack

The attack itself must be massive in scale and comprise coordinated and parallel hacks – a feat that, for the moment, only sovereign states have the capacity to achieve, if at all. Nevertheless, it is also important to note that such an approach might be too obvious, even if the operation is camouflaged with the utmost proficiency.

While digitization, networks, and increasing economic complexity make cyberattacks more likely, the complexity of it all may paradoxically be one of the best defenses. Hidalgo Hausmann suggests in “Atlas of Economic Complexity” that complexity is driving future economic growth. And ambitious countries will inevitably intensify that complexity as they increasingly depend on global trade.

Now that most products are globally produced, one supply chain can impact several countries. In the last decade, the global trade flow grew 10%, worth US$7.8 trillion in 2014, as revealed in a recent McKinsey report on the rising interconnectedness of the global economy.

Some countries are more connected than others, including China, the United States, the United Kingdom, and Russia. This means that the majority of all known cyberwar countries are highly connected, which is not surprising. However, a targeted attack on a complete supply chain requires a high level of resources that only some countries or organizations are able to invest.

Of course, success still depends on whether the risk of uncontrollable economic variables is large and operating in an increasingly dense digital spider web. While a large-scale attack might be not feasible in times of peace, it could certainly become a weapon for destabilizing economies of smaller countries.

Use the Advantage of the Swarm

Cybercrime is already reaching epidemic proportions. IBM’s chairperson, CEO, and president Ginni Rometty predicted last year that cybercrime may be the greatest threat to every company in the world. While the actual loss is difficult to estimate, The Wall Street Journal and Lloyds believe that the annual cost can range between US$100 billion and US$400 billion.

However, this same connectedness can also guard businesses against these threats. Such swarm behavior defends the entire network against predators, making it difficult to single out an individual prey. In larger supplier networks, a higher level of security might be achieved through collaborative efforts.

For more on the impact of digitizing the supply chain, read Live Business: Creating Digital Supply Networks.

Kai Goerlich is the Idea Director of Thought Leadership at SAP.

This story originally appeared on The Digitalist as part of the 10 Weeks of Live Business series.

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