The Expert Podcast

Here's another troubling result of the big CDK Cyber attack that hit car dealerships. Analysts from stock market research firms have said that there's a bleak outlook for car dealers after this Cyber attack, and this goes right in line with something we saw—we've reported on in the last year where, according to Inc magazine, 60% of small businesses fold within 6 months after a Cyber attack. Now, does that mean car dealerships will go out of business? Probably not, but a bleak outlook is not something you want high-level stock analysts talking about for your industry.

It also has an interesting footnote: one money-making section of retail will be hit the hardest. What does that mean? Well, it's not so much sales that will result in losses. Buried in the article, it says that the hardest hit from the outage won't come from showroom and sales floors; it'll come from service and parts. Service and parts involve a lot higher frequency of transactions. Look, a car dealership might sell 10 cars a day; they might have 40 or 50 service and parts tickets per day—five or six times as many. Each one of those now has to be done on paper.

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It has to be done manually, and some of those services will never get replaced. People need to buy a car—they'll probably buy a car later, but buy it from somebody else. However, service sometimes gets postponed permanently, and parts maybe they buy from a used parts store. Dealer service and parts will bear the brunt of this outage given the significant efficiency loss. New and used car sales will see a lower impact in the near term.

So even if you're not in the automobile industry or automobile retailing, remember that your business is still at risk for a Cyber attack, even if it doesn't hit your company directly. Remember, this CDK attack did not hit car dealerships directly; it hit their vendor CDK, which provides software to dealerships. So if you're in your industry and you have a software vendor or provider that issues a platform, app, or data collection for your industry, you might be at risk for the same type of hack that could hit your business. And remember, the areas of your business that are affected the most might not be as obvious. It might be payroll, accounts receivable, or inventory management. Those can have the same effect on long-term profitability or even long-term competitive market share as a direct hit on your sales.

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