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Cyber Insurance Critical for MSMEs

GS paper III

Context:

Cybersecurity has become an area of major concern for Micro, Small and Medium Enterprises (MSMEs).

Contribution of MSMEs

• India’s economic progress today heavily banks on the Micro, Small and Medium Enterprises (MSMEs) that are the backbone of the business ecosystem.
• Together, these enterprises contribute more than 28% to the GDP generating employment and trade opportunities. 
• MSMEs contributed 45.04% to overall exports during the Financial Year 2022. 
• The MSME sector plays a significant role in alleviating poverty and correcting regional
• MSME development can assist in better meeting SDG goals, including SDG 1 (ending poverty), SDG 2 (ensuring zero hunger), etc.

Vulnerability of MSMEs to cyber attacks

• MSMEs need a robust shield against any risks, given the high stakes. In this age of heavy digital reliance, businesses cannot afford to overlook the high financial and legal implications that come bundled with cyber risks.
• Increase in cyber attacks: A recent report by cyber security firm Acronis indicated companies in India have reported more cyber attacks than anywhere else in the world. 
• Wide range of risks: MSMEs have become prime targets for cybercriminals. They face a wide range of cyber risks including data breaches, malware attacks, phishing attacks and denial-of-service attacks.
• Soft targets: They are soft targets because compared with large corporations, they often have fewer resources to invest in cyber security. Also, they are less likely to have a team of security experts.
• Multi-pronged consequences: Studies indicate that about 43% of all cyber attacks are directed at small businesses and start-ups. The consequences are multi-pronged. They often result in financial losses, damage to reputation, and operational disruptions.

Cyber insurance needed for MSMEs

• Financial safety net: It provides a financial safety net, covering the costs associated with data breaches, ransomware attacks, and cyber incidents. For cash-strapped SMEs, this can be the difference between survival and insolvency.
• Cyber extortion protection: Cyber attacks on MSMEs often come in the form of ransomware and cyber extortion. The perpetrators hack into the systems and block all access unless the victim pays a ransom. Cyber insurance can help navigate through such risks.
• The policy can cover a wide range of costs, including notification costs, which are the costs of notifying customers and other affected parties about a data breach.
• Against operational disruptions: Such incidents can lead to operational disruptions. Cyber insurance typically offers coverage for business interruption, compensating for lost income during downtime caused by a cyber event.
• Affordable coverage: Cyber insurance can provide MSMEs the protection at a cost that they can afford.
• Intangible costs coverage: A cyber insurance policy often includes provisions for reputation management, helping businesses navigate the aftermath of a cyber attack and rebuild trust with stakeholders.

Steps taken by India

• Cyber Swachhta Kendra: The program provides free online security services to Indian citizens and organizations, including MSMEs. These services include anti-virus and anti-malware scanning, vulnerability assessments, and security awareness training.
• Digital MSME scheme: This scheme encourages the MSMEs to reduce risks associated with data storage store data in the cloud and reduce risks associated with data storage.
• National Cyber Security Policy: The objective of this policy is to strengthen the regulatory framework for ensuring a secure cyberspace ecosystem. It implies the protection of MSMEs from cyber-attacks as well.
• MSME Sambandh: The government launched this scheme to monitor and track the implementation of various government schemes, including cybersecurity-related initiatives, for the benefit of MSMEs.

Way forward:

• Awareness of cyber risks: Improve awareness of the various types of endpoint risks that your organization currently faces by conducting regular security checks and boosting the IT team’s capabilities. 
• Authentication: Ensure multi-factor authentication for all applications and devices and emphasize the use of strong passwords to avoid security breaches.
• Affordable tools: Facilitate MSMEs' access to affordable cybersecurity tools and services through partnerships with cybersecurity providers.
• Collaboration and information sharing: Create platforms where MSMEs can collaborate and share information about emerging threats and best practices.
• Awareness about regulation: Ensure that MSMEs are aware of and compliant with relevant data protection and privacy regulations, such as the Personal Data Protection Bill.
• R&D and Innovation: Encourage MSMEs to invest in research and development for cybersecurity innovations, offering financial incentives and support.

Conclusion

In an era where digital interconnectivity is the lifeblood of business operations, it is increasingly being realized that cyber security is not a luxury but a fundamental business requirement for MSMEs. Thus, protecting MSMEs from cyber-attacks is a shared responsibility involving government, industry associations, cyber security professionals, and business owners. These measures collectively contribute to strengthening the cyber security posture of these businesses in India.

Prelims PYQ

1. Consider the following statements with reference to India: (UPSC 2023)

1. According to the ‘Micro, Small and Medium Enterprises Development (MSMED) Act, 2006’, the ‘medium enterprises’ are those with investments in plant and machinery between ₹15 crore and ₹25 crore.
2. All bank loans to the Micro, Small and – Medium Enterprises qualify under the priority sector.

Which of the statements given above is/are correct?

A.1 only

1. 2 only
2. Both 1 and 2
3. Neither 1 nor 2
   

Mains PYQ

1. Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (UPSC 2023)

Restoring the ecological health of the Himalayas

Relevance: GS III (Environmental Governance)

Context

The Supreme Court of India has asked the Union government to suggest measures for managing the ‘carrying capacity’ of the Indian Himalayan Region (IHR).

Background

• The environmental devastation caused in the Himalayan States of Himachal Pradesh, Uttarakhand and Sikkim has reinvigorated the debate on the “carrying capacity” of the regions. The sinking of the ground and fractured buildings in Joshimath, Uttarakhand are another example of the decreased carrying capacity of IHR.
• Some committees formed earlier regarding the projects in IHR include –
  • Ravi Chopra Committee set up in the aftermath of the Kedarnath floods concluded that 23 out of 24 hydroelectric projects in the IHR would have an “irreversible impact” on the ecology of the region.
  • Vinod Tare Committee reiterated the recommendations of the Ravi Chopra committee. It concluded that these projects could have a significant environmental impact.
  • P Das Committee recommended design modifications of six projects and gave a go-ahead to them.

Suggestions given by the MoEFCC to the Supreme Court:

• The B. Pant National Institute of Himalayan Environment should lead a team to assess the ‘Carrying Capacity’ of all 13 Himalayan states and union territories.

• Constitution of Committee:
  • The Himalayan States/UTs should set up a committee headed by the Chief Secretary of the respective state.
    • Representatives: The representatives of State disaster management authorities, the Geological Survey of India, Survey of India and member secretaries or nominees of the Central Pollution Control Board and Central Ground Water Board should also be its members.
    • Experts: The team should include experts from research institutes in disaster management, hydrology, remote sensing, environmental engineering, forestry, and related fields.

What are the Challenges faced by IHR?

• Melting of glaciers: Glacier retreat and permafrost thaw are the enablers of the instability of mountain slopes and increase the number and area of glacier lakes, further leading to GLOF. Moreover, the thermal profile of ice is increasing making it more susceptible to melting.
• Erratic weather patterns: There are increased instances of cloudbursts and intense spells of rainfall and avalanches further placing the residents of the region at increased risk of loss of lives and livelihood.
• Lack of monetary and non-monetary compensation: The hydroelectric projects being built allot only a limited percentage of their produced power to the Himalayan states. Thus the State takes on massive environmental risk without being adequately compensated for it.
• River degradation: An increased number of rivers have gone through major degradation as the cleanliness of the river is premised on minimum levels of water flow in all seasons and the hydroelectric projects could hinder this.
• Lack of infrastructure: The changed environmental characteristics in the IHR have further made infrastructure projects in the Himalayan regions risky.
  • For example – expert committees recommended against building tourism infrastructural facilities and hydropower development beyond an elevation of 2,200 metres in the Himalayan region.

Way forward:

• The states have not yet submitted the action plans on carrying capacity, as requested by the environment ministry. Urgent action plans are required from the states.
• It is important to assess the overall sustainable capacity of the environment, which includes all biological species, food, habitat, water, ecology, and agriculture. To achieve this goal, an expert committee should be established to focus on the social aspects of population sustainability.
• The expert committee should not become a bureaucratic or technical group. It should include adequate citizen representation from panchayats and other urban local bodies.

Conclusion

The steps to protect the already fragile ecosystem of IHR should be taken in an apt and decisive manner. The Himalayan region is facing constant threats which need to be averted by the capacity building of the region and the development which is sustainable in nature. 

Mains PYQs

Q1)    'Climate change' is a global problem. How India will be affected by climate change? How Himalayan and coastal states of India will be affected by climate change? (2017)

Q2)    How will the melting of Himalayan glaciers have a far-reaching impact on the water resources of India? (2020)

Forex swap maturity

Context

The $5 billion forex swap between the RBI and banks got matured.

About

• A foreign currency swap is an agreement between two parties to swap interest rate payments on their respective loans in their different currencies.
  
• The agreement can also involve swapping principal amounts of loans.
  
• The two main types of swaps are fixed-for-fixed rate swaps and fixed-for-floating rate swaps.
• Foreign currency swaps can help companies borrow at a rate that's less expensive than that available from local financial institutions.
• They can also be used to hedge (or protect) the value of an existing investment against the risk of exchange rate fluctuations.
  

Hattee community

Demand for Scheduled tribe status in the Hattee community has regained momentum.

About

• The community resides in the Sirmaur district of Himachal Pradesh.
• The name 'Hattis' originated from the practice of selling locally grown produce such as vegetables, crops, meat, wool, etc. at small markets called 'haat' in towns.
• The community is divided into two clans - Trans-Giri and Jaunsar Bawar. The prominent Hattee community living in the Trans-Giri region has been demanding Scheduled Tribe (ST) status for over five years.
• The Hattis are governed by a traditional council called 'khumbli', similar to 'khaps' in Haryana, which makes decisions related to the community.