War and Infrastructure Event Readiness

With rising geopolitical tensions and sophisticated cyber warfare, organizations must prepare for war‐ or nation-state-level disruptions to critical infrastructure. The threat landscape now includes coordinated attacks on the electric grid, Domain Name System (DNS) outages, and major vendor compromises that can cascade across supply chains. Major incidents – from cyberattacks on Ukraine’s power grid to the SolarWinds supply chain breach and the Colonial Pipeline ransomware – underscore that even peacetime businesses can be caught in the crossfire of nation-state or criminal aggression.

Resilient Contract Design for Critical Infrastructure Outages

When critical infrastructure fails – be it electricity, internet backbone services like DNS, or essential third-party platforms – contractual clarity is the first line of defense in allocating risk. Traditional force majeure clauses have long excused non-performance for “acts of God” or war, but modern contracts must reckon with cyber and infrastructure failures that can be just as disruptive as natural disasters. Below are key contract provisions and strategies to enhance resilience.

Force Majeure with Tech-Aware Carve-outs

Ensure force majeure definitions explicitly cover truly uncontrollable events (e.g. large-scale power grid collapse, nation-state cyber-attacks) while excluding foreseeable outages that prudent planning could mitigate. For example, some clauses now exclude routine utility failures – on the premise that power outages should be managed via backups rather than excused. A well-drafted clause might state that a party is excused only if the event is beyond its control and the party took reasonable measures and maintained a contingency plan to deal with such an event. This motivates service providers to invest in redundancies (generators, alternate data centers, etc.) rather than lean on force majeure relief too readily.

Service Levels and Remedies for Outages

Contracts for cloud, telecom, or other services should have clear Service Level Agreements (SLAs) addressing uptime, recovery times, and data integrity. Include credits or financial remedies for downtime except in narrowly-defined force majeure cases. Even for force majeure events, consider obligations like progress updates, swift service restoration, and cooperation to minimize damage. Customers often seek to narrow force majeure to a closed list of truly unavoidable events and explicitly deny relief for issues that a provider could have prevented or mitigated. For instance, a DNS service outage caused by inadequate DDoS protection might be deemed within the provider’s control. By contrast, a global DNS root attack or internet backbone failure might qualify as force majeure – but even then, the contract can require the provider to prove its mitigation efforts and disaster recovery actions as a condition for relief.

Third-Party Dependency Disclosure and Backups

Many companies rely on a chain of vendors (cloud hosts, CDNs, software providers). Contracts should force transparency about critical sub-vendors and, where feasible, require multi-provider strategies or backups. For example, if a service uses a single cloud region or one DNS provider, the customer could negotiate terms obligating the vendor to maintain a secondary site or provider to take over if the primary fails. In practice, a supplier may resist such obligations due to cost, but at minimum the contract can stipulate that the vendor has assessed its own dependencies and has business continuity plans for their failure. Utility outages (power, telecom) that impact a vendor’s performance should be anticipated – either by treating them as non-excusable if backup options exist, or by explicitly addressing how costs and responsibilities are allocated when such blackouts occur. For instance, a data center provider might commit to generator power up to a certain duration of grid outage, beyond which force majeure applies. Clear triggers for what constitutes an “extended outage” can be set, after which the customer may have rights to terminate or invoke special arrangements if service cannot be restored.

Security and Notification Obligations

To tackle risks like cyberattacks on vendors (e.g. the SolarWinds incident), include robust cybersecurity requirements in contracts. Vendors should warrant adherence to industry security standards (such as ISO 27001 or NIST frameworks) and agree to timely breach notifications and cooperation in incident response. As one compliance expert noted after SolarWinds, managing supply-chain cyber risk can be “mitigated, in part, by inserting strong language into contracts with third parties,” weeding out those unwilling to meet strict security policies. Before signing any vendor agreement, companies should review the vendor’s data security and retention policies, breach response plans, and even cyber insurance coverage. It’s wise to contractually require vendors to promptly report incidents (within 24 or 48 hours of discovery, for example) that could compromise your data. The contract can also mandate regular security audits or compliance certifications, with the right for the customer to conduct or request independent audits – essentially “trust but verify” as an ongoing principle.

Liability and Insurance Provisions

Given the potentially enormous losses from a major outage or cyber event, negotiations often focus on liability caps and insurance. Vendors’ boilerplate contracts tend to limit liability for consequential damages and cap total damages at a low multiple of fees. Risk managers should push for higher caps or carve-outs for certain events (for example, liability for data breach or gross negligence might be uncapped or capped separately). Requiring vendors to carry cyber liability insurance is another tool – the contract can oblige the vendor to maintain a specified amount of coverage and to name the customer as an additional insured or at least notify the customer if the policy lapses. This doesn’t guarantee recovery (insurers themselves may dispute coverage in extreme events, as seen with “war exclusion” fights in cyber incidents), but it provides a possible financial recourse. From the customer side, contingent business interruption insurance is worth considering – some insurance policies will cover losses if a key supplier (like a cloud provider or utility) is taken down by an insured peril. For instance, after the Colonial Pipeline attack, many energy companies realized their traditional property insurance would not respond to a purely cyber-caused shutdown. Instead, a bespoke cyber policy with business interruption cover (including voluntary shutdown or failure of supply endorsements) was needed to fill that gap.

Resilient contracts strike a balance: service providers are protected from truly unforeseeable, catastrophic events, but they are also held to high standards of preparedness. Customers, for their part, gain clarity on what happens if the unthinkable occurs – whether they can claim relief, service credits, or terminate the deal. Both parties should explicitly address in the contract who bears which costs of a prolonged outage. It is far better to negotiate these terms in advance than to litigate after a disaster. Contracts must be adaptable and anticipate new challenges as the risk landscape evolves, ensuring neither side is left in the dark when critical infrastructure goes dark.

Stress Testing for Nation-State-Level Outages

Paper plans and contract clauses alone are not enough – organizations need to pressure-test their resilience through realistic simulations. This is where tabletop exercises, red-team simulations, and vendor continuity tests come into play. These practices help uncover hidden vulnerabilities and ensure that, in the chaos of a real incident, people know their roles and responses “by muscle memory.” Below are strategies to rigorously stress test an enterprise for war-scale events:

Tabletop Exercises: Wargaming Extreme Scenarios

A tabletop exercise is essentially a disaster drill conducted in a conference room (or over video call): stakeholders walk through a scripted scenario to evaluate response plans. To prepare for nation-state-level attacks or prolonged outages, incorporate extreme but plausible scenarios in tabletop drills – for example, a coordinated cyber-physical attack that blacks out the electric grid in multiple regions, or a major DNS service failure that disconnects your corporate network from the internet. Key best practices for these exercises include:

1. Engage both Technical and Executive Teams: It’s useful to run technical tabletop exercises (with IT, security, and operations teams focusing on the nuts-and-bolts response) as well as executive-level exercises that involve the C-suite and board. The technical team might tackle how to restore systems manually or reroute services, while the executive tabletop forces leadership to make high-level decisions (e.g. activating crisis communications, allocating resources, engaging government assistance). At minimum, aim for one of each type per year. Some organizations even alternate exercises quarterly – this frequency allows continual refinement of plans and keeps everyone practiced.
2. Use Realistic, Evolving Scenarios: A tabletop should have a detailed scenario narrative with injects (new developments) to simulate the unfolding crisis. Draw inspiration from real events – e.g. a scenario where malware from a state-backed hacker infects a critical vendor’s update (à la SolarWinds), or one where ransomware simultaneously cripples cloud providers and key logistics firms. GridEx, a large-scale exercise for the North American power sector, is a good example: it has simulated coordinated nation-state cyber/physical attacks on the electric grid, forcing participants to navigate widespread outages and communication breakdowns. Likewise, financial sector war-games have tested cyberattacks that disrupt markets and the DNS system. Scenarios should test both immediate incident response and longer-term recovery challenges (for instance, how to operate for weeks with intermittent power, or how to communicate if DNS is down). To keep the exercise effective, define objectives – e.g., “validate our 48-hour continuity plan without grid power” or “assess decision-making if primary and backup networks fail.” A facilitator can introduce twists such as backup systems failing or news of geopolitical escalation to mimic the pressures of a real crisis.
3. Debrief and Implement Lessons: The value of a tabletop comes from candidly identifying weaknesses. Each exercise should end with a debrief where gaps are noted: Did our incident response plan address this scenario? Were roles clear? Did we have sufficient backups for data and power? Often, tabletop drills expose assumptions – e.g. that a particular data center’s generator had fuel for 72 hours when in reality fuel supply is uncertain beyond 24 hours. These findings must translate into action: updating plans, improving training, or investing in more redundancy. Tabletop exercises also highlight policy questions – for example, at what point do we declare force majeure to customers? Who has authority to make that call? Working through those in a no-fault practice setting is invaluable.

Red Team Simulations: Live-Fire Cyber Testing

While tabletops are discussion-based, red team exercises go a step further by simulating actual attacks on your systems. A red team (often an internal security team or external ethical hackers) plays the role of a determined adversary – in this context, perhaps a nation-state hacker group – and attempts to breach and disrupt your organization just as a real attacker would. The key benefit is an unvarnished assessment of your defenses and response under realistic pressure. Best practices include:

• No Advance Warning to Defenders: To truly mimic a stealthy advanced persistent threat, red team operations are usually conducted without forewarning the IT and security staff being tested. This ensures the exercise reveals genuine security gaps and incident response performance under surprise conditions. As CohnReznick’s cybersecurity team describes, red teaming “mimicks the tactics and techniques that real adversaries might employ” and provides an unbiased test of your security posture.
• Test the Full Kill Chain: A nation-state caliber red-team exercise should probe all phases of attack: infiltration (can they penetrate the perimeter – perhaps via phishing employees or exploiting an unpatched system?), lateral movement (once inside, can they move between systems undetected and gain higher privileges?), and impact (can they exfiltrate data or disrupt operations?). Equally important, test your team’s ability to detect and respond. A good exercise might quietly compromise a system and see if monitoring alerts catch it, and how quickly responders contain it. Another angle is testing forensic readiness – e.g., after the red team “finishes” its simulated attack, does your team properly preserve logs and evidence to determine what happened? This is often overlooked, but in a real nation-state attack, preserving forensic evidence can be vital for legal and insurance reasons (proving what was accessed or damaged). The red team can then debrief the blue team (defenders) on what steps went unnoticed and how to improve detection and reaction.
• Incorporate Physical and Supply Chain Threats: For comprehensive war-game scenarios, consider expanding red teaming beyond pure IT. For example, test physical security and procedures (could an intruder tailgate into your data center or office and plug in a rogue device?). Or simulate supply chain attacks – perhaps the red team introduces a corrupted software update from a trusted vendor to see if your software supply chain integrity tools catch it. These advanced simulations help validate whether controls like code-signing verification, network segmentation, and employee security awareness are effective against high-level threats. Many companies also engage third-party firms that specialize in nation-state level attack simulations, since they can bring expertise on the latest tactics used by groups like APT hackers.

Testing Vendor Continuity and Dependencies

Even if your own organization is well-prepared, your resilience is only as strong as your weakest critical supplier. It is crucial to assess and test vendor continuity plans, especially for vendors providing mission-critical services (cloud hosting, DNS, telecommunications, data feeds, logistics, etc.). Here’s how organizations can tackle this:

• Demand Business Continuity Documentation: As part of onboarding or regular vendor management, obtain your vendors’ Business Continuity and Disaster Recovery (BC/DR) plans. Verify that they have plans addressing prolonged power loss, cyberattacks, and other catastrophic events. For example, if you rely on a cloud provider, do they have the ability to fail over to another region or a partner cloud if one region is hit by a cyber incident or natural disaster? Reviewing these plans is not a mere check-the-box – it may reveal red flags (e.g., a key vendor relying on a single data center in a geopolitically unstable region).
• Include Vendors in Exercises: Whenever feasible, involve critical third parties in your tabletop exercises or continuity drills. If you simulate an outage of the payment network or DNS service, invite the vendor’s reps to participate in the tabletop discussion about communications and recovery. At the very least, conduct facilitated discussions with critical vendors about how each side would handle scenario X or Y. This builds mutual understanding and can pressure-test the vendor’s promises. Some companies go further to perform joint exercises – for instance, scheduling a planned downtime test where the vendor actually switches service to a backup system to prove it works.

“Test your vendor’s continuity plan. This approach is critical if your business relies on an effective supply chain… ensure your vendor’s success as it is also critical to your business success.”

• Audit and Monitor Continuity Capabilities: Regular vendor risk assessments should cover more than cybersecurity; include questions about extreme event preparedness. How recently was the vendor’s DR plan tested? What were the results? You may request reports or even contract for rights to audit the vendor’s business continuity arrangements. For cloud and tech providers, industry certifications like ISO 22301 (Business Continuity Management) or SOC reports can provide some assurance. Additionally, ensure vendors maintain adequate backup resources. For example, a telecom provider should have multiple network routes; a data provider should have secondary servers in a different geography. Single points of failure in a vendor’s setup should be identified and addressed either contractually or via contingency plans on your side (for example, have an alternate vendor on standby if feasible).
• Plan for Vendor Failure: Despite best efforts, a war-scale event might knock out a supplier completely (consider how the Kaseya software attack or NotPetya malware disabled numerous vendors in the past). Your organization’s incident response plan should include contingencies for key vendors going offline. Tabletop scenarios should ask, “What if vendor X is down for a week – what’s our workaround?” Perhaps you maintain a cold standby system in-house or can quickly switch to another provider if data formats are standardized. Insurance can also play a role here: as noted earlier, contingent business interruption coverage can offset lost income if a supplier’s outage (due to an insured peril) shuts down your operations. Ultimately, testing and planning for vendor outages ensures you’re not simply outsourcing risk without backup. The Colonial Pipeline fallout was a wake-up call in this regard: the government and many businesses had outsourced critical operations and assumed the vendor had it under control, but found themselves scrambling when that proved false.

By rigorously stress-testing through these methods, an organization gains confidence that its plans on paper will actually work in practice. These exercises often involve relatively little cost compared to the potential losses of an unmitigated disaster. They also generate invaluable insights that feed back into better contract terms and insurance decisions – for example, an exercise might reveal that a prolonged DNS outage isn’t covered under current contracts or policies, prompting proactive fixes. The goal is to make sure that if a state-sponsored attack or other catastrophe strikes, the enterprise and its partners react in a coordinated, practiced manner, reducing chaos and downtime.

Lessons from Recent Global Incidents

Real-world crises provide a testing ground for theories of risk management. Several high-profile incidents in recent years have highlighted both successes and failures in handling war-scale infrastructure events.

Case Study: Ukraine’s Power Grid Cyberattacks

Modern warfare extends into cyberspace, as seen in Ukraine. In December 2015, hackers (later attributed to a Russian security service) executed the first known cyber-induced electric grid blackout. They infiltrated Ukrainian utilities months in advance, likely via phishing and malware, and on the chosen day remotely took control of circuit breakers to shut off power to ~225,000 customers. They also sabotaged restoration efforts by disabling backup power supplies and even bombarding call centers with a phone blackout to delay outage reporting. Although power was restored in about six hours and the overall impact was limited in scope, this event was a wake-up call globally.

Lessons and Contract/Insurance Implications
For critical infrastructure operators (energy, water, etc.), Ukraine’s incident underscored the need for robust cyber defenses and incident response plans. At a national level it prompted exercises and technology upgrades – U.S. utilities, for example, drew insights to bolster grid resilience. But for ordinary companies and insurers, the ripple effect is recognizing that prolonged power outages due to cyber warfare are plausible in any country. Businesses should ask: If the grid in my region went down for days due to a cyberattack, what is our plan? Do we have generators, fuel contracts, or alternate sites? From a contract perspective, service providers and tenants might revisit force majeure clauses regarding power loss. Some might negotiate that short-term power outages are the provider’s responsibility (to be handled with UPS and generators), only excusing truly extended, widespread blackouts. Insurers, on the other hand, have had to consider how such events are covered. A cyber-induced grid outage blurs the line between “property damage” and “cyber” coverage. If manufacturing equipment gets damaged due to a power surge from a cyber attack on the grid, is that excluded as an “act of war”? Clarity in policy wording is paramount. The Ukraine scenario foreshadowed debates like the NotPetya case, where insurers initially invoked war exclusions for a Russian cyber campaign – only to be challenged in court. (Indeed, a U.S. court later ruled that a general “hostile/warlike action” exclusion did not bar coverage for collateral damage from a nation-state cyberattack, forcing insurers to tighten their contract language.) The takeaway: emerging cyber warfare perils must be anticipated in policy and contract wordings – whether that means explicitly excluding them or affirmatively covering them with sublimits or government backstops.

Additionally, Ukraine’s grid attacks highlighted the importance of cross-sector coordination. Many industries rely on power and telecom; an attack on one can spill over. This has led to broader business continuity planning for infrastructure interdependencies. For example, data centers now coordinate more with fuel suppliers for generators (because in a crisis, fuel logistics become critical). Governments and insurers in some regions have also explored pooling mechanisms for extreme events (somewhat akin to terrorism insurance pools) in case a state-sponsored cyberattack causes systemic infrastructure failure.

Case Study: SolarWinds Supply Chain Breach

In 2020, the world learned that trusted software updates could become trojan horses. The SolarWinds Orion breach – an operation attributed to Russian intelligence – inserted malicious code into a routine update of a widely used IT monitoring tool. Up to 18,000 organizations, including Fortune 500s and governments, unwittingly installed the backdoored update. The attackers then used it to infiltrate high-value targets’ networks, stealing data and remaining undetected for months. This was a supply-chain attack of unprecedented scale. Its discovery caused thousands of companies to scramble to patch systems, assess exposure, and in some cases, report breaches to regulators.

Lessons and Contract/Insurance Implications
SolarWinds dramatically illustrated third-party risk. Customers of SolarWinds had little fault – they followed normal update procedures – yet suffered consequences. From a contract standpoint, this raised questions of liability and standards for software vendors. Most software license agreements severely limit vendors’ liability for security issues, and indeed SolarWinds itself likely had robust disclaimers. This incident has driven customers to demand more from critical software and cloud providers, such as contractual commitments to certain security practices, code testing, and breach notification obligations. Some enterprises now require vendors to conform to cybersecurity frameworks and even right-to-audit clauses to verify security, as mentioned earlier. However, the reality is that with widely distributed products like Orion, it’s impractical for each customer to audit the vendor – instead, the industry might move toward certifications or attestation of secure development practices. Insurers and regulators have also stepped in: cybersecurity audits and questionnaires for underwriting now routinely ask about supply chain risk management. Underwriters may inquire, “Do you inventory and assess the security of your third-party software? Do you have an incident response plan for a vendor breach?” Companies that can show robust third-party risk governance might enjoy better terms or premiums.

Another lesson is the concept of systemic risk. SolarWinds showed that a single attack could simultaneously compromise hundreds of insured companies. This is the nightmare scenario for cyber insurers – correlated losses on a massive scale. In the aftermath, insurers war-gamed even worse scenarios (what if a cloud platform or major operating system was similarly compromised?). To protect themselves, many insurers have started to introduce sublimits or exclusions for losses stemming from a single widespread event, and Lloyd’s of London went as far as mandating exclusions for state-backed cyberattacks on standalone cyber policies to curb systemic exposure. Risk managers should be aware: your cyber insurance might exclude events that are categorized as “nation-state supply-chain attacks” unless specifically negotiated otherwise. Thus, one practical upshot is to read your insurance fine print and possibly negotiate endorsements for certain scenarios – or arrange captives or alternative risk financing for those gaps.

Finally, SolarWinds reinforced the value of incident response preparedness. Organizations that detected and reacted swiftly fared better. It validated the practices of “Zero Trust” (not implicitly trusting software just because it’s inside your network) and continuous monitoring. In contract terms, this ties back to making sure vendors provide necessary information – for example, requiring software bills of materials (SBOMs) is now discussed, so if a component is compromised, users know if they are affected. While not yet a standard contract clause, SBOM requirements are gaining traction in government contracts and could trickle into private sector agreements as a way to increase transparency in the software supply chain.

Case Study: Colonial Pipeline Ransomware Attack

In May 2021, ransomware brought a major U.S. fuel pipeline to a halt. An attacker group (criminal in motive, though potentially operating with tacit approval in Eastern Europe) penetrated Colonial Pipeline’s IT network and, as a precaution, the company shut down its fuel distribution operations for several days. The outage led to fuel shortages in several states and a spike in gas prices, sparking a federal emergency declaration. Colonial paid the hackers roughly $4.4 million in cryptocurrency (portions were later recovered by the FBI), and the incident became a catalyst for new cybersecurity directives in the pipeline industry. For the risk world, Colonial Pipeline was a vivid example of cyber risk crossing over into physical-world consequences.

Lessons and Contract/Insurance Implications
One immediate lesson: having the right insurance coverage matters. Colonial reportedly carried a ~$15 million cyber insurance policy. While details of claims are private, it’s noted that had Colonial only relied on property insurance, it likely would have had no coverage since the attack caused no physical damage (a requirement for property business interruption coverage). Instead, their cyber policy could cover extortion costs, incident response, business interruption from the cyber event, etc. Even so, losses (including the ransom, recovery costs, lost revenue, and potential legal liabilities) may have exceeded the policy limit. This has prompted many companies in the energy and manufacturing sectors to re-examine their insurance programs. Insurers too have adjusted – expecting more risk control from insureds and sometimes reducing coverage limits for critical infrastructure operators. After Colonial, underwriters increased scrutiny on things like: multifactor authentication deployment, network segmentation between IT and operational technology (OT) networks, and incident response plans. They also look at what contingency plans a company has if they need to shut down operations (for example, can alternative suppliers or manual processes keep supply flowing?).

From a contract and operational standpoint, Colonial’s case emphasized vendor and partner risk as well. The pipeline’s shutdown affected airlines, gas stations, and consumers – none of whom had a direct contract with Colonial, yet they suffered losses. This highlights a tricky area: contingent business interruption without a direct contractual relationship. Businesses that depend on a single supplier (like a refinery depending on Colonial for distribution) might want to negotiate backup arrangements in contracts (e.g., the ability to quickly divert product to trucks or alternate pipelines, albeit at lower capacity). It also underscores the importance of government-industry coordination; contracts aside, industries might need to collaborate on mutual aid agreements for emergencies, similar to how electric utilities have pacts to share crews and equipment during disasters.

Another crucial takeaway is the role of third-party due diligence and oversight. Colonial Pipeline’s IT systems were the entry point; one could analogize Colonial as a “vendor” of fuel transportation to its customers. The government and businesses that relied on it had assumed Colonial’s security was adequate, but the attack revealed gaps. A JD Supra legal analysis pointed out that this attack “exposed a blind spot in the government’s reliance on third parties to manage critical infrastructure”. The lesson for any company is: when you outsource or rely on a third party, you outsource the work – not the responsibility. You must vet vendors’ security upfront and remain vigilant after. As mentioned earlier, before contracting you should review a vendor’s security controls and incident response plans, and negotiate provisions to ensure you’re promptly informed and protected if they have an issue. Colonial’s incident spurred many companies to do exactly that with their own critical suppliers – asking for detailed security info, requiring vendors to carry cyber insurance, and setting up communication pathways for incidents.

Finally, Colonial Pipeline showed how public relations and legal fallout can amplify the impact. Within two weeks of the attack, lawsuits were filed alleging negligence by Colonial. Regulators were also quick to issue directives. Companies in all sectors should note that in a major outage affecting the public, you may face scrutiny not just from regulators but from customers and even state attorneys general if data exposure or consumer harm is involved. Thus, part of readiness is having a tabletop exercise around crisis communications and liability management – e.g., how would you handle public disclosure, what if you need to coordinate with law enforcement or national security agencies, etc. All of these “soft” factors can be just as critical to outcome as the technical response.

Emerging Risks

The coming decade will likely see new forms of cyber warfare and geopolitical risk entwined with technological dependency, creating novel challenges in risk allocation and resilience. Here are some emerging risks and trends to monitor, and their implications for contracts and insurance.

Geopolitical Fragmentation and Conflict

Geopolitics are increasingly volatile, with great-power competition (US-China, Russia-West, etc.), regional conflicts, and even cyber proxy wars. These tensions raise the risk of state-sponsored attacks on civilian companies, critical networks, and supply chains. We may see more attacks on satellite systems, undersea cables, and critical internet infrastructure as part of conflicts – for example, the 2022 hack on Viasat’s satellite modems amidst the Ukraine invasion foreshadowed this, knocking out communications in parts of Europe. Businesses reliant on emerging tech like satellite broadband or global positioning should consider redundancy (can you fall back to terrestrial communications if satellites are jammed?). Insurers are responding by carefully delineating war exclusion clauses – expect policy language to keep evolving so that “cyber war” is defined more clearly, possibly with coverage carve-backs for certain cyber incidents even in conflict. There is also a trend toward government intervention: in some countries, essential service providers might be required or incentivized to carry certain insurance or follow specific security protocols under national security laws.

Cyber Warfare 2.0 – More Destructive and Stealthy

The next generation of cyberattacks could be more destructive (targeting safety systems, industrial controls, or data integrity) rather than just stealing data or encrypting files. We’ve already glimpsed malware capable of causing physical damage (like the Industroyer malware aimed at power grids, or Triton malware that targeted petrochemical plant safety systems). Attackers may use AI to enhance their tactics – AI-driven attacks that adapt in real time, or deepfake spear-phishing that is nearly indistinguishable from authentic communications. According to threat assessments, supply chain compromises of software dependencies remain a top threat into 2030, alongside things like advanced disinformation and attacks exploiting legacy IoT devices. Contracts might need to incorporate expectations around these risks – for example, a data integrity attack could mean a vendor’s data feed corrupts your data; how does your contract allocate responsibility for corrupted data? From the insurance angle, products may emerge covering affirmative cyber-physical loss (some insurers already offer coverage for certain cyber-induced physical damages, but it’s evolving). Underwriters will likely push insureds to adopt advanced threat detection (e.g. AI-based network monitoring) – potentially verifying this via security audits or even connecting to certain threat intelligence networks as a condition of coverage. Companies should invest in threat-agnostic resilience – designing systems that can revert to safe mode if anomalies are detected, even if the type of attack was unforeseen.

Rise of Extended Supply Chain and Concentration Risks

Global supply chains have become so intertwined that a shock in one place can have far-reaching effects. We saw this with the pandemic and again with the semiconductor shortages. Over the next decade, cyber and physical risks to supply chains will continue to grow. Think of a scenario where a key chip manufacturer is in a conflict zone, or a major cloud provider suffers a prolonged outage – the ripple effects could hit thousands of companies. Another worry is authoritarian regimes leveraging technology dependencies – for instance, a country that is a dominant source of rare earth minerals or electronics could use that as a geopolitical tool (restricting exports, inserting backdoors in hardware, etc.). For businesses, the mandate is to increase supply chain transparency and avoid single points of failure wherever possible. Contractually, this means including clauses about supply chain disruption in major procurement deals – e.g., requiring suppliers to have multi-region contingency plans or at least to inform you of any subcontracting to high-risk regions. Some buyers are also writing in the right to source from an alternate supplier without penalty if the primary supplier is disrupted by war or sanctions. Meanwhile, insurers are developing more sophisticated models for contingent business interruption and are likely to cap their exposure to certain supplier-failure events. We may see insurance solutions like parametric covers (which pay out a set amount if an index trigger is met, say if internet traffic in a region drops by X% indicating a blackout). These can provide quick liquidity when conventional claims might be murky due to war exclusions.

Regulatory and Legal Shifts

Emerging threats are spurring governments to update laws – for instance, the EU’s NIS2 Directive and various national security regulations require better risk management for digital supply chains and critical infrastructure. Data privacy laws are also imposing hefty penalties for breaches, including those caused by third parties – adding another layer of financial risk if things go wrong. Going forward, contracts will need to align with these regulations: expect more mandates to flow down cybersecurity requirements to subcontractors, more need for notification within 72 hours or less (to comply with laws like GDPR), and possibly the requirement to cooperate with government cybersecurity programs. Insurers in some markets might offer benefits for compliance – e.g., premium credits if an insured is certified under a recognized cyber standard. Conversely, non-compliance could even invalidate coverage in some cases (as regulators demand that companies maintain certain baseline controls). Legal trends also indicate more litigation around cyber risk – for example, shareholders suing directors and officers after a major cyber incident (claiming oversight failure). This means D&O insurance policies are also considering exclusions or specialized coverage for cyber events. Risk managers should keep an eye on how policy language for D&O and cyber might conflict or overlap in a large incident.

Human Factor and Insider Risks

Not all threats are high-tech – often it’s human error or malicious insiders that cause breaches. Over the next years, insider threats may be exacerbated by geopolitical influence (e.g., employees recruited or coerced by nation-states) and by the sheer complexity of systems that humans struggle to manage. Training and vetting will remain key. Businesses might incorporate clauses in employment contracts about consequences for sabotage or require certain employees to undergo security clearances if working on critical systems. Insurance typically doesn’t cover intentional acts by the insured’s insiders easily, so that’s a risk to mitigate through controls. Also, disinformation campaigns could indirectly harm companies – imagine fake news causing a run on a bank or a stock drop. Those are hard to insure (though there’s talk of coverage for cyber-related business impact that isn’t directly from a hack). Preparing for that might involve PR crisis plans and engaging with law enforcement on attribution (since if an attack is clearly state-sponsored, sometimes governments offer aid or the event might be certified under a terrorism insurance program if applicable).

The next decade will demand a proactive and adaptive approach. Professionals will need to constantly update contract templates, insurance coverages, and continuity plans as the threat landscape shifts. The concept of “threat-agnostic resilience” is gaining traction – building systems and organizations that can withstand shocks whether from a cyber weapon, a natural disaster, or an unforeseen source. This means diversifying suppliers, decentralizing operations where possible, keeping contingency funds or insurance for black swan events, and maintaining a culture of preparedness. The organizations that thrive despite war-scale disruptions will be those that have not only planned for failure but have practiced and hardened their responses in advance.

Wrapping Up

In the environment we've described here, resilience must be engineered – through precise contract language, rigorous testing, and forward-looking risk management. Contracts should no longer treat catastrophic outages as afterthoughts or boilerplate, but rather as scenarios to allocate and mitigate risk with clear eyes. Insurance policies, likewise, should be scrutinized and tailored to ensure that when the worst happens, coverage is there (and exclusions are understood).

Equally important is the human and organizational element: running war-game exercises, involving stakeholders up to the board level, and demanding accountability from vendors and partners. The examples of Ukraine, SolarWinds, and Colonial Pipeline show that even well-resourced entities can be caught off-guard – but they also highlight that preparation and resilience measures make a difference in outcomes. Each crisis has nudged the industry to improve – from tightening contract terms to strengthening incident response.

The charge is clear. Ask the tough “What if” questions now, in times of relative calm: What if the grid goes down? What if our cloud provider is knocked offline by a nation-state? Who pays for losses if that happens – and how do we survive it? By addressing these questions in contracts, insurance programs, and exercises today, organizations can face the future with far greater confidence. Those who embrace a proactive, collaborative approach to war-scale risk readiness will help their organizations not only withstand the shocks to come, but perhaps even gain competitive trust by demonstrating robust reliability in an uncertain world.

Thanks for reading.