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U.S. cybersecurity risk: ‘The bad guys are more active than ever’, says Verisk CEO

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Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi speak with Verisk Analytics CEO, Scott Stephenson, about the digital transformation forced by COVID-19.

Video Transcript

JULIE HYMAN: If you're looking for risk these days, there is a lot to choose from. Obviously, coronavirus a huge risk, you have political risked that now is maybe a little bit more mitigated. Weather risk, climate risk. Let's bring in someone who analyzes risk. That's Scott Stephenson. He is the CEO of Verisk, which provides risk analytics services to a number of different types of companies. And so, Scott, I do want to start broad and ask what you think the biggest risk for business or the globe is going to be in 2021?

SCOTT STEPHENSON: In 2021, I think it's going to be a continuing need for companies to move in the direction of being what I call, the better digital version of themselves. And companies are on this journey, but at very different rates. And while there's a lot of effort, which is being put in, the simple fact of the matter is, that you cannot overhaul your digital infrastructure overnight.

And so companies will continue to find that different aspects of their business models by degrees are still responding to this need to be working in a very remote way, in a way where supply chains have been disrupted, and all the members of the supply chain are on their own journey in their own particular way. And so I think that there's kind of that sand in the gears. I think that's the most ubiquitous issue that we have in the economy right now.

JULIE HYMAN: Well, and Scott, as we were just talking about, so many of these companies have been forced to make those digital changes very quickly this year. Have they not perhaps been as deliberate and as careful as they could have been while making this transformation, just because they didn't have the time, because of what has been going on with coronavirus? So what specifically, I mean, is it cybersecurity or are there other areas that companies really need to focus on where they need to be paying attention?

SCOTT STEPHENSON: Yeah, there's a variety of issues which relate to the technical infrastructure of companies. And I broadly think of them as falling into two categories. One is the ability to operate at scale with efficiency. And that was really sort of the first point that I just made. But the second point that I would make about the digital world is, this is a very good moment for the bad guys, any sort of disruptive moment. And it's very possible that any given company by degrees, might take their eye off of the defensive ball as it relates to warding off cyber threats.

And we clearly see in the data that the bad guys are more active than ever. And it ranges across state actors, highly energetic private players coming from IP addresses that are halfway around the world, et cetera. So the level of attack is higher than it's ever been. My concern is, is everybody paying enough attention to their defenses?

BRIAN SOZZI: Scott, about 50% of Verisk's business is tied to the upstream part of the energy ecosystem. How are you thinking about that business as President-elect Biden comes in? If he makes it tougher for oil companies to do business in America and globally, how does it impact your business?

SCOTT STEPHENSON: Yeah. So thanks, and let me take that on at two levels. So with respect to our own business, the majority of what we do is actually not tied to the upstream so-called, unconventional sources, particularly in the lower 48. And so if, for example, the incoming administration or any administration was to make a choice that was working against, for example, things like fracking, our company's own exposure to that part of the energy ecosystem is relatively small. So it don't really have that much effect upon us.

What we have to watch for is the fact that the global supply demand balance could change. And a change in US policy would be one of those. Another change that would actually affect the supply demand balance would be the world's posture relative to Iran. Iran is an exporter. As you know, they've been very curbed in their ability to export.

But if there was any change in that, in both cases, you're talking about a couple million barrels per day of oil against a supply picture which normally looks like about 100 million barrels per day. And in any commodity at the margin, just even a few percentage points difference in supply can actually make a big difference in either direction. So if there is a reduced supply, that would be felt. But also, if in the case of Iran, for example, there was more supply, that also wouldn't have an effect.

JULIE HYMAN: Scott I do want a pick up though on the climate question, not just for energy companies, but for your clients broadly. You have increasing cognizance of climate-related risks. You have the Federal Reserve now looking for more transparency from companies on that front. Do you think that companies are doing a good job of assessing that risk? And what's the biggest climate-related risk that they need to be watching out for?

SCOTT STEPHENSON: Yeah. So the nature of the climate risk itself, so if one is in a TCFD kind of a framework I'm thinking about how do I describe risks and opportunities related to climate change, that is going to be very bespoke to the industry and the individual company. There really is not one answer to that. But the more general point would be that companies should be warming up their brains to the use of science-based targets as a way of thinking about where are you going to set your own goals, et cetera.

And the reason I say warming up your brains is, there is no consensus today on the right way to kind of summarize metrics which describe how a company is doing in ESG land, which includes the E part of that, which includes the energy and the climate-related issues. There is no framework that is agreed to by everybody today. There are many frameworks, but not one. And so at the moment, companies are listening to their constituents, especially their investors, and trying to figure out how they're going to describe where they stand in terms of goals for environmental carbon reduction, for example. So everybody is kind of thinking about it right now.

One of the things that is talked about, but has not become standard yet, is using science-based targets for setting reduction targets. So I think it would behoove the average business leader to become familiar with that methodology. It's not critical today, it's not required today. We're going to hear more about it as we go forward.