The Economic Repercussions and Inefficiencies of Cyberhacks: Sony

The recent cyberattack on Sony Corporation’s film studio has led to the realization and understanding that corporations network’s are not as secure as some may believe, allowing cyberterrorists access to a multitude of information that have strong long-term effects on the recipient. In the case of Sony, the WSJ reports that, “The digital intruders at Sony broke into the system, posted on the web tens of thousands of personal records of Sony employees and contractors – including actors such as Sylvester Stallone – and erased corporate hard drives.” Not only were these documents leaked, but also the entire studio’s lines of communications were shut down because the hackers also had access to their email, phones, etc. They then had to resort to a phone tree where updates of the hack were relayed from person to person, payroll had to cut checks manually, and the rest of the employees were forced to conduct business from notepads and their gmail accounts – according to the Sony Entertainment Chief Executive Michael Linton.

 

With an attack of this magnitude, forcing an entire company to change their systems, client relationships and public perception of the company are at serious risk. Although these are crucial for a successfully run business, especially within the entertainment business, which revolves around relationships and trust, the access to information can lead to much more serious market effects. In the widespread release of information following the malicious cyberattack on Sony, leaked emails, content, and destruction of content are among lesser worries as the cyberhackers released information on Sony’s current legal battle. According to the WSJ, “Sony received a subpoena from the Securities and Exchange Commission regarding possible violations of the U.S. Foreign Corrupt Practices Act, which makes it a crime to bribe an overseas government official.” This investigation specifically revolves around the U.S. studio’s navigation of Chinese distribution for their films.

 

While the details of the leaked documents and investigations are less relevant than the magnitude and extent of cyberattacker’s access, it is crucial to understand the effects of these attacks on corporations. By leaking crude emails, content, and documents, trust and relationships will be lost which will hinder the company moving forward in terms of efficiency. With the transition over to the phone tree, manual payroll, and other precautionary measures, Sony will experience a period of less profitability, even aside from the lost box office numbers when they cancelled the wide release of the film, The Interview. In terms of the release of government documents, alerting the public of confidential matters that may or may not be true, Sony will suffer from a negative public perception, ultimately leading to a direct effect on investment. With charges moving forward and a less trustworthy studio, investors within the industry will be hesitant to fund films, talent will be less likely to return, and lastly, the public will be afraid to purchase SNE, as it was shown in the immediate 10% drop after the hacking. From this case with Sony, it is clear that there are immense effects on corporations after undergoing a cyberhack of this magnitude, highlighting the immense importance of cyber security and the protection of documents as well as the ease of access for global cyberterrorists.

 

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