Tertiary Risks from Israel-Hamas War

The Israel-Hamas war continues to go on as Israel prepares for a major ground invasion, and Gaza is facing total collapse because of the restrictions placed on the area. The death toll for Gaza has likely already reached above 4,000 people (militants and civilians). On October 17, an attack on a hospital in Gaza reportedly killed around 500 people, though it is currently unknown who committed the attack as Israel and Hamas blame each other. With the war developing, there are broader issues and risks that governments and corporations are facing outside of the region. First, there are major cybersecurity concerns as Israel, Hamas, and hacktivists all attempt to harm different parties. Cybersecurity firm CyberCX has already noted that outside groups are likely using the conflict as an excuse to target organizations in Australia. Tech workers who focus on cybersecurity in Israel will also not be able to focus on protecting corporations while they are fighting Hamas, which will make them more vulnerable to attack from APTs. Second, violence and terrorism in the West is seeing an increase in a number of areas. Antisemitism has spread on right-wing platforms; hate speech has increased 500% on 4chan as well. Disinformation about the war is spreading prolifically, and this has the potential to incite further violence and terrorism as well. This is why U.S. and U.K. intelligence agencies have warned specifically about more domestic terrorist attacks stemming from the conflict. Lastly, the war poses significant risks to brand and reputation. Starbucks is suing its union Starbucks Workers United because of a social media post in support of Palestinian's in Gaza. Starbucks is taking the action because of concerns that the post will be misattributed to the company. There are also a growing number of calls for boycotts of brands and events because of statements, or lack thereof, about the war. Insight Forward continues to monitor the conflict in Israel because it is important to understand the tertiary and incidental threats that arise. The war will have effects beyond the immediate vicinity and impact corporations in a number of areas over the medium term.

New Demographic Data on China

China’s demographic problems are getting significantly worse, and they indicate major issues over the next several years for corporations. According to a report by the National Health Commission, births in China declined 10% in 2022 to just 9.56 million, which is the lowest since 1949 when the records started. That same year China’s population also declined for the first time in sixty years. When China implemented the one child policy, the goal was to create demographic stability. However, economic, and cultural factors accelerated the problems. For example, many families chose only to have a boy, and there are millions more boys than girls in the country. Now, the cost of childcare and employment problems are dissuading young people from having any children (like issues in the West). The new data supports evidence for a few major risks from China. First, it increasingly appears as if the country will get old before it gets rich, meaning that healthcare and welfare costs will significantly increase without less productivity and fewer jobs. This will likely have negative social implications and increase the likelihood of internal instability. More worryingly, demographics could propel China to move against Taiwan earlier rather than later because President Xi will want the country to attack from a position of strength. China still has 1.41 billion people, but the structural issues that come with an inverted population pyramid will have deleterious impacts economically and socially. Corporations will want to take note of this risk for their long-term investments.

Costa Rica Calls China Threat to 5G Networks

In a surprise statement, the Costa Rican minister for science, technology, and telecommunications told lawmakers of the Central American country that Chinese companies are cybersecurity threat to 5G networks. Other ministry officials called the Chinese government “totalitarian.” China’s embassy quickly criticized the comments, calling them “irresponsible and unfounded.” All of this follows President Rodrigo Chaves’s decision to ban companies from countries that have not agreed to the international cybercrime convention. This is ultimately a minor diplomatic spat, but it is an indicator that China is losing ground in the international arena when it comes to perceptions of them as a threat. Furthermore, it is an indicator that the balkanization of technology is moving towards Central and Latin America.

Cyberattacks on Manufacturing Companies

Simpson Manufacturing Company told the SEC that it experienced a major cyberattack on 10 October, becoming the latest in a series of cyberattacks on the manufacturing sector. The attack on Simons disrupted their IT infrastructure, and the company had to take their systems offline. This attack follows other incident involving Volex, a U.K.-based manufacture, and Johnson Controls. Johnson Controls was an alarming attack because it likely compromised information about DHS floor plans. The cybersecurity company Dragos has noted that in Q2 2023 alone there were 177 ransomware incidents involving manufacturing companies. Cyberattacks against infrastructure or government can cause disruptions, but attacks on manufacturing can have far more impactful events on the economy because of the way supply chains work. These incidents have the potential to impact corporations beyond those that are attacked, especially when they play a critical role in other sectors of the economy like data centers or electric vehicles like Volex.

Poland’s Ruling Party Loses Election

Poland’s ruling Law and Justice (PiS) has lost an election and will cede power to the opposition parties: liberal, pro-EU Civic Coalition (KO), centre-right Third Way, and the Left. They plan to form a coalition government. PiS is further right than most of the EU, and they have placed the country at odds with the organization on issues of immigration and LGBTQ rights. The new ruling majority plans to move Poland closer to the EU and undo many of the reforms PiS put into place. There is a persistent problem in Eastern Europe of illiberal democracy challenging the EU’s values and norms. Poland’s PiS is only one such party. Although the right-wing party lost this election, it is not a full indicator that nationalist parties are on the decline in Europe. PiS still won the most votes of any party, and they had ruled the country for eight years. There will continue to be tension over the medium term between right-wing nationalist parties and liberal, pro-EU parties in Eastern Europe.

New President of Ecuador

In Ecuador, 35-year-old Daniel Noboa won the vote in a presidential election that saw multiple assassinations and significant violence. Noboa has pledged an almost quixotic agenda of increasing working opportunities for the young, reducing crime through technology, and improving anti-corruption measures. Ecuador is an important indicator for general violence and stability in Latin America, and the tumultuous nature of these elections shows that the country and region are facing increasing threats from criminal gangs and drug traffickers. There are unlikely to be any major changes over the medium term, but corporations should note the continued instability and violence that pervades the region.

India Food Prices and Export Restrictions

On 18 October, India extended its restrictions on sugar exports. The restriction has been in place for the past two years, but the extension follows India's ban on rice exports that started in July, and a 40 percent tax on onion exports. Wheat prices in India have also reached an 18-month high because of high demand and weak supply.  The export restrictions are intended to reduce domestic food prices ahead of elections next year. India is the world's second largest sugar producer and accounted for 40 percent of global rice exports in 2022. The restrictions are negative for global food security and are likely to drive protests and unrest, which we highlighted as one of our top 10 geopolitical risks for 2024 - read the full report here or watch our short explainer.

New California Privacy Law Signed

California Governor Gavin Newsom signed the Delete Act into law, a new privacy bill that will allow residents to request that personal information be deleted from all data brokers. This is a significant expansion of the current California Privacy Protection Agency (CPPA), and the law requires them to establish an easy-to-use mechanism for Californians to request their data be deleted. Data brokers who do not comply will be fined and penalized. For individuals concerned about their privacy this should make it easier to remove PPI from online. However, the legislation is likely to have significant negative effects on various industries, and it will likely harm mostly smaller businesses. Such data is important to many industries and businesses, for example, advertising. The law is also likely to hamper law enforcement’s ability to purchase data to target criminals.

Data Breaches Reach Record Levels

Data breaches in 2023 have already surpassed previous years’ numbers with the total through September being 2,116 data compromises. This is a 17% increase over the total number of data compromises in 2022. This new reporting shows that both governments and corporations are failing to mitigate the consistent ransomware and other cyberattacks on most organizations. Of note, the MOVEit vulnerability was connected to three of the most impactful breaches in Q3 2023. See the chart below for comparison of numbers of data breaches since 2017.