Do we underestimate Digital Risks?

The expansion of the digital economy has come with a lot of benefits, but it has also elevated and created certain risks, ranging from online bullying to misinformation to fraud. This has implications for consumers and businesses alike: the digital economy is it’s own wild-west, requiring us to take the right countermeasures.

In a newly-released working paper, together with Andrew Grotto at Stanford University, my new research matches the Lloyd’s Register Foundation World Risk Poll, conducted by Gallup, with Rapid7’s National Industry Cloud Exposure Report, which provides a measure of cybersecurity exposure for each country. Using over 60,000 individuals from 54 countries, we assess how people perceive digital risk and whether these perceptions are related with actual cybersecurity vulnerabilities within a country.

We obtain two main results.

First, 18.7% of individuals worry about online bullying, but even higher share of 34.8% and 27.4% report worrying about misinformation and fraud. We also find that individuals who use social media are significantly more likely to worry about online bullying, misinformation, and fraud by 67%, 72%, and 39%.

Second, we find no statistically or economically significant association between actual cybersecurity vulnerabilities and any type of digital risk among users and non-users of social media. Whether you’re in a country with strong versus lax cybersecurity vulnerabilities, your perception of digital risk is roughly the same.

These results suggest that consumers are worried about digital risk, but that the worry is not mediated by the actual degree of cybersecurity vulnerabilities. Dating back to the seminal contributions of Nobel Laureates Daniel Kahneman and Amos Tversky in 1979, one reason for the lack of attention may be due to our tendency to neglect low probability events, like fraud, when we are going about our daily decision-making.

But, there are things we can do to combat these digital risks, just like we take the proper precautions when we’re putting on our seatbelt in a car or buying insurance for our home. For starters, digital literacy is becoming essential in today’s economy—that is, how to maintain not only a productive digital presence, but also a secure one that allows us to tap into the benefits of the digital economy without being attacked.

One way to get more comfortable is by acquiring basic data science and/or programming skills. Even if you aren’t interested in a cybersecurity career, data science will not only arm you with practical techniques for making more strategic business intelligence decisions at work, but also provide the confidence to hold your own in the digital landscape. There are many options available and the cost is fairly low, especially when put in perspective of the benefits and competing options for, say, a traditional master’s degree.