Moody’s has revised its Equifax outlook from stable to negative, citing the effect of the 2017 data breach. This is the first time that a cybersecurity incident has resulted in a Moody’s outlook downgrading.
It isn’t all down to the hack. A difficult consumer and mortgage credit lending market is complicating matters. Growth in the latter half of 2019 could improve matters, but Moody’s describes this as ‘uncertain’.
In the meantime, the financial fallout from the breach continues. In September 2017, Equifax announced a breach that had led to the potential loss of personal information for approximately 145.5 million U.S. consumers, 19,000 Canadians, and 15 million Britons (for which it was fined the maximum possible £500,000 by the UK data protection regulator). The breach occurred in May, but wasn’t discovered until July.
The British fine is likely to be dwarfed by U.S. sanctions, and it is the combination of uncertain but sizable future costs against the background of a difficult market that has Moody’s concerned. It expects the total legal and IT costs to Equifax to exceed $1.4 billion. This is more than earlier estimates, and contributes to the downgrading.
On May 10, 2019, Equifax announced that it had taken a charge of $690 million in the fiscal quarter ending March 31, 2019. This represents the company’s estimate for settling ongoing class-action litigation, and potential state and federal fines. A further $400 million this year, and $400 million next year will be spent on cybersecurity expenses and capital investments.
While the negative rating from Moody’s is not currently a fatal blow to Equifax, it is significant as being the first time Moody’s has downgraded the financial outlook for a company based primarily on the effect of a cybersecurity incident. It demonstrates how damaging a major breach can be.
Related: Industry Reactions to Equifax Hack: Feedback Friday
Related: Equifax Was Aware of Cybersecurity Weaknesses for Years, Senate Report Says
Related: U.S. House Report Blasts Equifax Over Poor Security Leading to Massive Breach
Related: Equifax Warned About Vulnerability, Didn’t Patch It: Ex-CEO
Kevin Townsend is a Senior Contributor at SecurityWeek. He has been writing about high tech issues since before the birth of Microsoft. For the last 15 years he has specialized in information security; and has had many thousands of articles published in dozens of different magazines – from The Times and the Financial Times to current and long-gone computer magazines.
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