Cybercrime is on the rise. While data breaches at large organizations from SWIFT to the IRS make front-page news, no company large or small is immune. Family offices, fund administrators and other firms whose success is built on trust and establishing strong investor relationships stand a lot to lose from a cyberattack. If data integrity or client privacy is compromised, the long-term reputational scar on the firm can far outweigh any monetary cost involved in prevention.
And it’s not just client information that is at risk. Cybercriminals have been known to commit data piracy — stealing a company’s proprietary algorithms and other important information and holding it for ransom.
To lessen the chance that your firm becomes another cyber statistic, here are some of the key risks and how to safeguard against them.
Human risk
Cybersecurity isn’t just about technology. While anti-virus software and other applications offer some protection, another issue – and one that is harder to manage because it is less prescriptive – is the human element.
Research paints a sobering picture for firms neglecting cybersecurity. Studies reveal the stark consequences of laxity. Ponemon Institute’s 2023 report exposes: a staggering 83% of financial services organizations fell victim to successful phishing attacks in the past year, many facilitated by compromised employees. CISA’s data further amplifies the alarm, with a 69% surge in cyberattacks targeting the sector compared to 2021. And IBM Security’s 2023 study paints a complex picture, with 43% of attacks exploiting both social engineering and technical vulnerabilities, highlighting the need for a holistic defense strategy. These figures leave no room for doubt: neglecting cybersecurity leaves firms exposed on multiple fronts – from vulnerable employees to sophisticated technical exploits. Taking proactive measures becomes not just best practice, but a vital necessity for survival in today’s ever-evolving threat landscape.
Managing the human risk begins with employee training. Teach employees to recognize a cyber threat/cyber scam and establish protocols for handling and containing a breach.
Connectivity risk
With the enormous amount of information available online and client demand for 24/7 access across multiple devices, it is harder than ever to protect every link in the technology chain. Unsecured devices, public Wi-Fis and sloppy cyber hygiene provide an open door for cybercriminals.
To mitigate connectivity risk, limit the use of personal and unmonitored devices for work, ensure sensitive data is encrypted, use two-step verification and require regular password changes.
Operational risk
Smaller firms with limited technology budgets, staff and expertise are the most vulnerable to attacks. Trojans, malware, viruses, hackers and other infiltrators can exploit loopholes in security and wreak havoc on a company’s systems and data.
Basic precautions go a long way to curbing operational risk. Monitor systems and applications regularly to ensure software is up to date and virus protection is installed. At the same time, don’t skimp on technology or IT support.
TMI risk
Sharing too much information (TMI) on social media and corporate websites can expose a company to one of the latest cyber scheme – executive impersonation.
Executive impersonation occurs when perpetrators hack into a company website and mine social media to identify key contacts and procedural information. Posing as a company executive, they request a wire transfer or other financial transaction that appears legitimate. An unsuspecting employee approves the request and transfers the funds to the perpetrator’s account. According to the FBI, executive impersonation scams have impacted more than 22,000 companies around the world and resulted in over $3 billion in losses.
Prevent executive impersonation with a combination of employee training and stringent policies for use of social media. In addition, establish protocols for financial transactions that require multi-level authentication, verification and authorization.
Third-party risk
Often overlooked, third-party risk is a growing concern due to increased outsourcing of key processes and the global nature of business. Less than half of alternative asset managers are focused on third-party data oversight, which poses an “unmitigated cyber risk,” according to KPMG.
To reduce third-party risk, know your vendor ecosystem. Perform regular due diligence on your vendors and their subcontractors, and establish contractually dictated protocols for security.
Evolving Threats Demand Proactive Defense:
While fundamental practices like employee training and data encryption remain crucial, the cyber landscape constantly shifts. Today’s attackers are increasingly exploiting sophisticated tactics like ransomware campaigns, supply chain vulnerabilities, and advanced phishing techniques. To stay ahead of the curve, proactive defense is paramount.
Incorporate strategies like:
- Threat intelligence monitoring: Stay informed about emerging threats and vulnerabilities through threat feeds and intelligence reports. This allows you to prioritize patching efforts and prepare for potential attacks.
- Continuous vulnerability assessments: Regularly scan your systems and networks for weaknesses, identifying and patching vulnerabilities before attackers exploit them.
- Multi-layered security solutions: Employ a combination of security tools, including anti-malware software, endpoint detection and response (EDR) systems, and intrusion detection/prevention systems (IDS/IPS) to build a comprehensive defense network.
- Robust data encryption: Go beyond basic encryption. Use strong algorithms and key management practices to ensure sensitive data remains unreadable even in the event of a breach.
Cloud-Based Security
Smaller and midsized firms in particular face an uphill battle. Maintaining a dedicated IT security team can be cost-prohibitive, leaving them vulnerable to increasingly sophisticated cyber threats. Thankfully, the cloud can provide a powerful solution, acting as a shield against these emerging dangers.
Here’s how the cloud empowers smaller firms to achieve robust cybersecurity:
- Centralized Security Expertise: Cloud providers like AWS, where FundCount’s system resides, invest heavily in cutting-edge security infrastructure and protocols. This means smaller firms gain access to the same high-grade security measures typically reserved for larger companies, without the hefty in-house investment.
- Automatic Updates and Patching: Patching vulnerabilities promptly is crucial in cybersecurity. Cloud-based systems automatically handle updates and patches, ensuring your platform remains up-to-date against the latest threats, a burden often neglected on in-house servers due to resource constraints.
- Scalability and Agility: Cloud security scales with your needs. As your firm grows, your security posture can seamlessly adapt, eliminating the need for costly infrastructure upgrades. This dynamic approach lets you focus on business growth, knowing your security scales alongside it.
- Data Redundancy and Disaster Recovery: Data breaches and hardware failures can be devastating. Cloud systems offer built-in redundancy and disaster recovery mechanisms, ensuring your data remains secure and accessible even in unforeseen circumstances.
FundCount’s cloud-based system is AWS compliant, which is Amazon’s security protocol that empowers customers with robust controls in place to maintain security and data protection in the AWS Cloud.
If data integrity or client privacy is compromised, the long-term reputational scar on the firm can far outweigh any monetary cost involved in prevention
Take action
There is no room for complacency with cybersecurity. The best defense is a strong offense. Firms that proactively implement policies and procedures to identify risks, protect data and close loopholes will be on sound footing to safeguard against cybercrime. FundCount takes security seriously. Our software supports industry-standard security protocols for data storage, connectivity and application-level user access to help mitigate cyber risks.
