Due to changes in the cyber security landscape, traditional firewalls on the port level are no longer effective at managing traffic. Malicious traffic has the capacity to enter any open port, which provides great risk to firm security. Next-generation firewalls work further than port-based firewalls by adding application inspection and intrusion prevention. Next generation firewalls have the ability to scan traffic as it enters and leaves the network, therefore stopping potential threats.
Eze Castle Integration is increasingly implementing Palo Alto next-gen firewalls for our hedge fund and alternative investment firm clients. Palo Alto is not only a next generation firewall but it is also the market leader based upon ratings, support, pricing and overall performance. A Palo Alto firewall has the ability to detect what traffic is doing and immediately stop threats from spreading by distributing protection.
Unknown traffic is analyzed by Palo Alto Wildfire, where new threats are identified and protections are simultaneously developed. Upon the discovery of an unknown threat, the threat is not only blocked but updates are sent to all global subscribers within five minutes to be able to stop them from spreading. Due to this feature each threat and its variants are blocked without having to go through the analysis process again. Through Wildfire information is also fed through a filter which allows for automatic blocking of any correlated threats.
Older port-based models do not detect what traffic is doing, therefore allowing threats to port hop until they find an open port in which they can enter. Viruses are not port specific and can therefore utilize any port. Without analyzing what traffic is doing threats can easily bypass a port-based model.
The current threat landscape is such that security threats are more likely to arise from within your network as opposed to external sources. Internal users opening malicious emails or becoming victims of phishing schemes are now preferred methods for attackers. The next generation capabilities of the Palo Alto firewalls allow for deep application level inspection to detect and thwart these threats from opening backdoors to your network.
Additional Advantages of Next Generation Firewalls
All-in-one functionality: Next-generation firewalls bundle traditional firewall functionality with intrusion prevention, antivirus and protocol filtering.
On occasion, hedge fund C-level execs don’t see eye to eye. It’s inevitable. One such topic of occasional discord is outsourced IT. Chief technology officers (CTOs), for example, are immersed in every level of technology, from applications to security to disaster recovery, and they have a vested interest in concerns from user experience to business continuity and beyond.
Meanwhile, chief financial officers (CFOs) must focus on the bottom line, factoring in the cost-benefit of new technologies and projects. Elsewhere in the C-suite, the chief operating officer (COO) is looking at opportunity costs and asking key questions including if the CTO is managing day-to-day IT “plumbing,” which strategic projects are getting pushed aside?
Following is an excerpt from a whitepaper we recently published looking at various C-level perspectives on IT outsourcing – including where certain executives may differ on its value, where those same executives can agree, and ultimately why outsourcing IT and using the cloud sets alternative investment firms up for success. DOWNLOAD THE FULL PAPER HERE.
The cloud point-counterpoint
Based on investor comfort, the SEC’s increased scrutiny of cybersecurity practices and the impact of legislation like the Dodd-Frank Act, moving to private cloud services seems like a no-brainer. The cloud creates a far more cost-efficient and effective way for alternative investment firms to improve security and manage day-to-day IT demands. So why the conflict between CFOs/COOs and CTOs?
Total Control Comes with Risks
One reason for the conflict is that CTOs want to retain control, and understandably so. Outsourced security measures may seem opaque compared to the control they impart – it is tempting to believe that no third party could be as invested in system resiliency (i.e. disaster recovery) and security as the firm itself.
The reality is that most CTOs are so tasked for time and money that they cannot maintain complete control over their environments. The burden of ensuring continuous, reliable and secure operations is difficult even for large enterprises that have vast time and budgets and potentially unsurmountable for smaller teams. Often only the largest firms can adequately invest in and manage the layers of security necessary to defend against growing cybersecurity threats.
In seeking to retain control, CTOs are limiting their options. Embracing the idea of cloud-based services expands the CTO’s team, provides greater redundancies and enables more cost efficiencies. Most importantly, it lets the CTO focus on priority IT projects that enhance and improve the company’s bottom line.
CTO’s Role is Evolving
Procuring, maintaining, testing and upgrading adequate technology on-premise is out of reach for most alternative investment firms. It is also becoming an antiquated strategy. Today’s progressive CTOs are increasingly drawing on cloud technology to create agile firms that can quickly deliver the applications users require.
CFOs/COOs must recognize the valuable business knowledge and insights the CTO can insert into functions including risk management, product development, operations and innovation. CTOs must understand where they can deliver functional results and utilize the cloud as an IT-enabler for the firm.
As the CTO’s role evolves, so does the entire IT team. Too often in-house IT teams are allocating valuable time to reacting to IT issues and troubleshooting rather than proactively solving user issues or addressing regulatory mandates.
Outsourcing Has a Track Record
CFOs and COOs have the advantage of positive experiences with outsourcing. Many have used third-party providers for functions like payroll, accounting or even hiring, so it’s not surprising that they tend to be more comfortable with bringing in cloud service providers to deliver more efficiencies and dedicate focus to revenue-producing activities.
Last month, BlackBerry introduced its final smartphone to the market, signifying the company’s strategic shift to focus on software. While Apple’s iPhones and Google’s Android devices continue to dominate the market, BlackBerry will finally pull back and remove itself from the competitive device landscape.
And while its last entrant to the race, the DTEK60, has much to offer in terms of encryption technology and security software, the outlook remains grim. To many, this has, perhaps, signaled the beginning of the end for BlackBerry. Thus, we take a glance back at what was once a hugely successful enterprise:
September 1996 – Research in Motion/RIM introduces its Inter@ctive Pager 900, a two-way paging device.
January 1999 – The first device with the name “BlackBerry”, the BlackBerry 850, hits the market as an email pager.
June 1999 – BlackBerry Enterprise Server (BES) is released for general availability. BES, at its height, was the de facto operating software solution for enterprise handheld communications.
There’s a lot of confusion across the industry about the difference between cybersecurity vulnerability assessments and penetration tests. A common reaction we hear is:
“You mean they aren’t the same thing?!”
Since we hear the two terms interchanged a lot, we thought it might be helpful to clear up some definitions and use cases for each. Let’s start with vulnerability assessments.
A vulnerability assessment is a discovery action used to identify and categorize potential exposures across your environment. The VA is a broad-spectrum effort designed to gauge your firm’s security posture with regard to external threats. (NOTE: Internal vulnerability assessments are also growing in frequency)
Here’s what the vulnerability scanning process typically looks like:
Identify systems, networks, and infrastructures at hand
Scan networks to determine areas of vulnerability toward external security threats
Create a database of known vulnerabilities and classify based on their unique severity
Make recommendations around remediation of risks and vulnerabilities
So how is penetration testing different?
To wrap up and round out our 6-week Risk Outlook Webinar Series, we spoke with John Cotronis, Executive Director at JP Morgan, about hedge fund risk management and governance. Specifically, he addressed the following questions:
What have you observed in recent years in terms of changes affecting hedge funds – particularly at the startup phase?
Have you noticed a marked shift in the importance managers are placing on risk?
Do the firms you typically engage with have staff on hand to manage risk – compliance officers, etc.?
In terms of corporate governance, where do you see investment firms excelling when it comes to implementing risk management controls and also fostering a culture of risk management across the firm?
Let’s talk a little bit about counterparty risk. What kind of criteria are you looking for that indicates to you a provider has the right risk management framework and best practice structure to support your clients?
A lot has gotten tougher for firms, particularly on the investment side with capital raising, also with regulatory reporting, etc. What areas of operations do you think have gotten easier for hedge funds over the years?
What is your assessment of outsourcing risk – is it higher or lower than managing various functions in-house?
As financial firms become increasingly interconnected and globalized, their dependence on cyberspace has skyrocketed. While this amplified reliance on the infobahn has accelerated productivity and growth, it has also exposed firms to larger risks, such as hacking, malware, spyware and social engineering. The latter, which is the most disregarded element of an organization’s security program, is also the most dangerous.
Social engineering (e.g. phishing, pretexting, baiting, etc.) relies on the exploitation of human behaviors to breach an organization’s information security system. Hackers prey on propensities of human nature, including:
Trust: Some people are trusting to a fault; therefore, they do not question the intentions/identity of another person until proven to be false.
Ignorance: Disregard for the consequences of carelessness with sensitive business information.
Laziness: Willingness to cut corners, such as not filing away confidential paperwork and leaving it exposed for others to see.
Kindness: Employees want to feel that others can leverage them for their assistance and information because we’ve trained them to do so. However, this can lead to divulging too much information to the wrong person.
As our Risk Outlook Series continues, we recently spoke with John Araneo, Partner at Cole-Frieman & Mallon LLP in New York, about many of the regulatory risks facing hedge funds today, including compliance, expense allocations and cybersecurity. Continue reading for a brief synopsis or scroll down to watch our webinar replay below.
How would you describe the current regulatory climate for fund managers and investment advisers?
For hedge fund managers and investment advisers, the regulatory expectations have never been higher. Looking ahead to 2017, managers and advisers should expect the challenge of having to navigate potentially seismic regulatory changes - each of which has the potential to complicate business practices and add to the cost and complexity of compliance.
How should clients prepare to react to these changes?
It’s a top-down approach that all comes down to compliance. A culture of compliance is no longer a lofty goal or a cliché; it is now a regulatory expectation. There needs to be a robust compliance program, actual implementation, and accountability. Clients should be prepared and able to effectively manage the SEC examinations. Managers need to take time to understand regulatory priorities and expectations before an exam.
What is the current regulatory regime's appetite for outsourcing the compliance function?
There is no requirement for firms to employ a full-time person to service compliance. However, the worries about outsourcing certain functions, particularly the compliance officer function, may lead to weakened compliance culture. The opportunity of outsourcing creates a gap between the compliance function and the operations, decision makers and day-to-day activities. Outsourcing can be effective and sufficient, but management needs to resist setting it and forgetting it.
With October being cybersecurity awareness month it is an important time to ensure your firm and employees are aware of and using best practices, and security policies and procedures. Risk mitigation is needed to protect both the firm and its employees from savvy hackers and attacks. Data breaches continue to wreak havoc on businesses, and the cost is continuously rising. According to the Ponemon Institute, the total average cost of a data breach is now $4 million, up from $3.8 million in 2015. Hackers have everything to gain while your firm bears reputational and operational harm.
While companywide policies should reflect long-range expectations and corporate best practices, they should also include tactical recommendations that employees can follow to ensure they are complying with the company’s overall risk strategy. To get started here are just a few pieces of advice we offer our investment firm clients and remember to not only inform employees on what to do, but also what not to do.
In honor of October being National Cyber Security Awareness Month, we’ll be bringing helpful articles on a range of topics starting with this one on understanding malware.
We’re also debuting our first interactive game, FreEze!, where your challenge is to hit malware before it hits you (à la Space Invaders). Play the game below or keep reading for more on malware -- or do both!