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    A Quick Cybersecurity and Municipal Bonds Update

    Jim Colby, Portfolio Manager and Strategist, Municipal Bonds
    April 05, 2019


    Back in August and September 2017, we published a three-part series of Muni Nations entitled Cybersecurity and Municipal Bonds. In it we explored the intersection between cybersecurity and the municipal bond market. We concluded, amongst other things, that cybersecurity standards that safeguard municipal lenders are critical.

    It is perhaps no coincidence that in the past week to ten days there have been articles in The New York Times, as well as a segment on CBS News’ 60 Minutes, concerning “cyber” in various contexts. Increasingly, more attention is being paid to concerns in this area.

    Incident Update

    Since we wrote last, here are some municipal cybersecurity incidents that were reported in 2018 (who knows how many weren’t?): mostly in February and March—for some reason:

    • City of Leeds, Alabama: Ransomware attack—loss of computers
    • City of Atlanta: Ransomware attack—loss of computers
    • Colorado, Department of Transport (DoT): Ransomware—loss of computers
    • Baltimore: Cyberattack on 911 dispatch system—temporary disruption

    Damage sustained varied from serious disruptions to service and business-as-usual, to losses of data and, of course, any ransoms paid. The costs to Colorado associated with the attack on its DoT were estimated to be well over $1 million and those to Atlanta more than $20 million.1

    In the corporate space probably the most egregious incident has to have been the massive data breach at Marriott in which, amongst other things, 327 million people had such information as their names, telephone numbers, email addresses, and passport numbers exposed.

    And only the other morning (March 19), reports were coming in of a cyberattack at the one of Europe’s largest aluminum producers, Norsk Hydro. Quoted in the Financial Times,2 Eivind Kallevik, the company’s finance director said: “The situation for Hydro through this is quite severe. The entire worldwide network is down.” The ransomware used appears to be the same that was used against French company Altran Technologies (a leading engineering and consulting firm) earlier this year.

    Is Anything Being Done About It?

    From where we sit here in Midtown Manhattan, the answer seems to be: “Not that much—that we can see.” Now, of course, we may be wrong. But if anything really significant is actually being done, we have yet to learn about it.

    Since we last wrote, we have had some very smart people come by the offices to chat about a number of different sorts of ratings around cybersecurity for municipal bonds. All have given persuasive and certainly quite interesting pitches. But have we heard anything positive from them thereafter? No.

    As we wrote before, but perhaps even more so, not only does there seem to be little sense of urgency out there, but also any incentive to do anything prophylactic, as opposed to curative, still appears totally absent—except, needless to say, to those who have already been clobbered.

    A Little Light—Perhaps?

    In September last year, the U.S. Government Accountability Office (GAO) published a report to “Congressional Committees” in its “HIGH-RISK SERIES” (indicative in itself!) entitled “Urgent Actions Are Needed to Address Cybersecurity Challenges Facing the Nation”.3

    In its own words, the GAO had “identified four major cybersecurity challenges and 10 critical actions that the federal government and other entities need to take to address them.”

    The GAO does not mince words and what struck us so forcefully looking at these challenges and critical actions was that you could easily substitute “state”, “municipality”, “city”, “local government”, etc., where and when appropriate, for “national”, “federal”, etc., and they would be just as relevant. And important.

    Here they are:

    Major Challenges

    Critical Actions Needed

    Establishing a comprehensive cybersecurity strategy and performing effective oversight

    • Develop and execute a more comprehensive strategy for national cybersecurity and global cyberspace
    • Mitigate global supply chain risks (e.g., installation of malicious software or hardware)
    • Address cybersecurity workforce management challenges
    • Ensure the security of emerging technologies (e.g., artificial intelligence and Internet of Things)

    Securing federal systems and information

    • Improve implementation of government-wide cybersecurity initiatives
    • Address weaknesses in federal agency information security programs
    • Enhance the federal response to cyber incidents

    Protecting cyber critical infrastructure

    • Strengthen the federal role in protecting the cybersecurity of critical infrastructure (e.g., electricity grid and telecommunications networks)

    Protecting privacy and sensitive data

    • Improve federal efforts to protect privacy and sensitive data
    • Appropriately limit the collection and use of personal information and ensure that it is obtained with appropriate knowledge or consent

    At least, seven months later, cybersecurity remains a concern for the administration. On March 18, describing her department’s priorities4 for the coming year, Homeland Security Secretary Kirstjen Nielsen said: “On top of my list of threats, that many of you can guess, the word ‘cyber’ is circled, highlighted and underlined. The cyberdomain is a target, a weapon and a threat vector all at the same time.”

    However, when it comes to cities, towns, and other municipal governments, such concern has not been as evident. In addition, as so succinctly put in an article in The American Prospect5 last year: “Many of the problems that municipalities face do not require deep knowledge of information systems technology—there are individuals who can bring those skills set to the table—but rather a firm handle on assessing threats and making the required decisions to assure security.”


    The services provided by municipal borrowers remain vital to our everyday life. The need to protect the provision of these services has become ever more critical. The effects of not doing so have become ever more apparent and the costs of remediate ever more expensive.

    We believe that, when it comes to cybersecurity, despite the availability (and use) of cyber insurance, cure, as opposed to prevention, should really no longer be an option. When it comes to a credit rating, those borrowers who continue to depend upon the former should be subject to even closer scrutiny. And those who are actually doing something about cybersecurity should be rewarded.

    We so look forward to updating you more positively next time. But we are not holding our breath!


    On April 2, Security Affairs6 reported that, the prior weekend (starting on Saturday morning), the computer systems of the City of Albany, New York, were infected with malware in a ransomware attack. At the time of writing no further technical details were available.

    Post Disclosure  

    1The Wall Street Journal: More U.S. Cities Brace for ‘Inevitable’ Hackers, September 4, 2019,

    2Financial Times: Aluminium producer Norsk Hydro suffers cyber attack, March 19, 2019,

    3U.S. Government Accountability Office: Urgent Actions Are Needed to Address Cybersecurity Challenges Facing the Nation, September 2018,

    4C-Span: [Starting at 27:44]

    5The American Prospect: Securing Cities from Cyber Attacks, April 18, 2019,

    6Security Affairs: Computer systems in the City of Albany hit in Ransomware Attack, April 2, 2019,


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  • Authored by

    Jim Colby
    Portfolio Manager and Strategist, Municipal Bonds

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