JASON HEALEY | Senior Research Scholar, School of International and Public Affairs, Columbia University, and Non-Resident Senior Fellow, Cyber Statecraft Initiative, Atlantic Council
PATRICIA MOSSER | Senior Research Scholar and Director of the MPA in Economic Policy Management, School of International and Public Affairs, Columbia University
KATHERYN ROSEN | Global Head, Technology and Cybersecurity Supervision, Policy and Partnerships, JPMorgan Chase
ALEXANDER WORTMAN | Senior Consultant, Cyber Security Services Practice, KPMG

Recent events have made clear that both the financial system and the networks of cyberspace are inherently complex, fragile, and interdependent. This paper contributes to the growing literature on cyber risks to the financial system by presenting a high-level analytical framework to guide analysis of how a cyber attack could cause financial instability and how financial system fragilities might be targeted by cyber attackers. 

The framework outlines linkages between the two sectors, particularly those which might cause contagion across the financial system. If a firm or market wants to understand systemic cyber risks in the financial sector, then conducting integrated analysis of how the various systems (technology, back office, business, and financial decisions) interact and propagate shocks collectively is key. 

The paper is divided into four main sections: cyber risks, financial stability, the “transmission channels” by which cyber risks can induce financial turmoil, and the amplifiers and dampeners that shift the balance of risks. An appendix provides a sample set of questions designed to assist with implementation of the framework for a specific market, financial infrastructure or sector.