- Threat Beta,
Marriott’s Threat Beta vs. Stock Price
Starwood Hotels was the victim of a hack that start in 2014. During that attack, 327 million customer records (PII & PCI) were compromised. Marriott bought Starwood in 2016 for 13.6B, w/o knowledge of the hack. Only after the investigation started did Marriott invest significant assets in Cybersecurity
Marriott’s stock dropped 6% (~2.3B) when the hack was announced. Cyber insurance may have saved the stock from crashing that day. The stock price eventually dropped to $109 per share. due to the loss of intangible brand value and customer support.
It took a breach for Marriott to make the right cybersecurity investments as seen by the decrease in cybersecurity risk over time. An important lesson is to buy enough cyber insurance to cover insurable losses. That’s a good way to put a floor on potential stock losses even though it could take years for a policy to payout. Another important lesson is to analyze all acquisitions for cyber risk before integrating them into one’s network. Preventative cybersecurity investments have a higher ROI, so invest the time to check for risks before a breach occurs.