Abstract
Digital liabilities are the unknown future costs that occur after an event related to digital assets threatens organizational value. These events emerge from: (1) an IT data breach or cybersecurity failure; (2) IT infrastructure limitations that limit future opportunities; and (3) changes in business models that are limited due to IT infrastructure. Potential digital liabilities are not fully understood and can be difficult to quantify. Derived from prior research, this research note proposes four methods, modified from existing research literature, for estimating the cost of digital liabilities prior to a digital asset compromise. We conclude the research note by discussing opportunities for future research in this area.
Highlights
The balance sheet is a statement of what a company owns, owes, and the amount invested by its owners
Digital liabilities are the unknown future costs that occur after an event related to digital assets threatens organizational value
Other measurable costs are incurred after a digital asset is compromised, such as customer compensation, legal fees or fines, and are recorded in the financial records after the compromise
Summary
The balance sheet is a statement of what a company owns (assets), owes (liabilities), and the amount invested by its owners (shareholder equity). The intangible value of digital assets appears to be incorporated into stock prices, explaining some of the difference in the valuation of digital versus physical companies. Another aspect to consider is that a complete valuation of the financial position of a company requires an accurate assessment of the potential liabilities associated with possessing digital assets. This discussion outlines opportunities for future research
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