Local governments are facing a growing threat from cyberattacks, creating a financial battleground for investors eyeing municipal bonds. As hackers target public institutions, the financial implications resonate beyond the immediate damages, offering both peril and opportunity for bondholders.
Weak protections in local governments make them increasingly susceptible to attack, impacting essential services such as schools, hospitals, and utilities. Ransomware attacks on K-12 public schools nearly doubled between 2021 and 2022, leaving institutions struggling to recover and avoid future threats.
Why it matters: As cybersecurity on local governments increases in frequency, the financial fallout reaches beyond the municipalities themselves, affecting the creditworthiness of bonds issued by those entities. Bondholders are taking notice of security vulnerabilities that could compromise a municipality’s ability to make debt payments, weighing cyber risks more heavily in investment decisions.
- The increasing frequency of cyberattacks on local governments directly affects their financial stability, threatening credit ratings and impacting municipal bonds.
- Los Angeles United School District has been forced to allocate significant funds- hundreds of millions of dollars in this case- to secure technology infrastructure.
- The Securities and Exchange Commission (SEC) has recognized the need for increased transparency, mandating publicly traded companies to report cyberattacks.
Go Deeper –> A Hidden Risk in the Municipal Bond Market: Hackers – The Wall Street Journal
