The following article first appeared in Hedgeweek's special report: Cybersecurity for Fund Managers 2016.
Mitigating insider risk is one of the biggest challenges that organisations face when it comes to remaining cyber secure.
One thing we've seen a lot of with clients is their need for consulting support," says Mark Coriaty (pictured), Senior Vice President Strategy & Partnerships, Eze Castle Integration. "They don't necessarily have the biggest IT teams and/or might have been more focused on the engineering side than the cyber side. Consequently, they are spending more time learning about the business, as opposed to just putting a solution in place.
"Cybersecurity comes down to operational and procedural policies as well as employee training, which is by far one of the biggest threats to any firm."
Many of the reasons for internal breaches come down purely to human error, but on occasion it may be the actions of a rogue employee that lead to data misappropriation. To limit the impact, fund managers can put in place permission controls as a way to manage their policies and procedures, this might allow them to shut off a USB drive, protect different file sets on the back-end etc.
"It is important for whomever is managing the overall IT infrastructure to ensure that people only have access to data that they need for their day-to-day responsibilities, and block them from accessing data in other parts of the organisation," says Coriaty, adding that employee training has to be an ongoing process. "For larger firms who hire new employees regularly, managing the process of training them is crucial to maintaining good security. Most hackers target smaller investment managers not to collect credit card numbers, or investor details, but for extortion purposes using the likes of CryptoLocker to pay ransoms.
As a hedge fund or investment management firm, you’re juggling a lot. Hedging bets, pitching investors, running day-to-day operations – there’s a lot on your plate. That’s why working with an experienced cloud services provider can offer benefits beyond just infrastructure.
Let’s take a look at three different ways your cloud services provider can de-stress your busy life and provide you with much needed value.
1. Free up your space.
One of the beauties of a cloud computing environment is the near elimination of physical hardware and equipment on-site at your office. When managing your own server room or Communications (Comm.) room, you are responsible for housing a variety of equipment such as servers, UPS units, networking equipment and cables, spare parts, etc. Not to mention you need the real estate for it all. And don’t forget – much of this equipment runs on a three-year refresh cycle, which means you’ll have to upgrade everything in the near future.
Last month, the SEC issued a guidance update for registered advisers regarding how funds (and their service providers) plan for potential business disruptions. Eze Castle Integration’s Certified BCP Planners have reviewed the guidance and recently shared their thoughts on how hedge funds and private equity firms can meet the SEC’s growing expectations and standards with regard to business continuity practices.
Read on for five takeaways from the SEC’s business continuity guidance update or scroll down to watch our full, 30-minute webinar replay.
Include all All Key Components of Your Firm
When writing a BCP, firms undoubtedly remember to create plans for their physical office facilities and technology systems, but it is important that you don’t overlook other important components that drive the well-being of your firm. This includes data/colocation centers, employees, activities and dependencies on critical third parties. You could face an array of issues affecting one or more factors within your firm, so it is important to implement a business continuity plan that not only addresses potential risks but also outlines comprehensive protection methods.
A BCP is a Living Document
Internal participation is a fundamental driver for a successful BCP. From senior management executives to representatives from Human Resources and Compliance, internal business continuity contributors need to be informed of and up-to-date on policies and procedures. The BCP should also take into consideration the ideas, recommendations and changes brought forward from other departments within the firm.
Remember: A business continuity plan is dynamic, therefore changes and challenges faced need to be transparent with all parts of the company.
Today’s private equity funds are increasingly being compared to their hedge fund counterparts and, as a result, are also facing more scrutiny. When it comes to managing and mitigating risk, PE fund managers are wrestling with growing threats on the security front and beyond and mounting pressures from the likes of the SEC and other industry best practice standards.
Security and Business Threats for Private Equity
Security threats abound for financial services firms, and private equity firms are not immune. From the inside out, the risks to PE firms grow daily, with savvy and experienced hackers looking to target financial firms – and perhaps more concerning – untrained and unaware employees blindly putting their firm’s operational standing in danger.
Beyond cybersecurity, however, there are also business threats to consider. Non-security incidents – everything from minor, incidental business disruptions to large-scale, regional impact events – can also wreak havoc for private equity firms otherwise unprepared to resume business functions. Downtime may prove to be less concerning for a PE manager than his hedge fund counterpart, but that does little to calm uneasy clients and investors who expect operations to run smoothly at all times.
PE Firms Feeling the Regulatory Pressure
The above security and business threats pose a serious challenge for private equity firms today. But beyond managing those risks to satisfy a fund manager’s own inherent desire to protect his/her firm, private equity firms also face significant and growing pressure from external bodies to meet operational excellence standards that continue to develop and evolve.
The following article was written by Dean Hill, Executive Director, Eze Castle Integration and first appeared on Hedgeweek as part of their special report: A Guide to Setting up an Alternative Investment Fund in Europe.
There is no shortage of threats to financial services firms, and the list of requirements from investors and regulators alike is growing at a rapid pace. As a startup, it's important to demonstrate to investors that you take your business seriously, hence, investments in operational excellence are required. On the cybersecurity front, that means leveraging technology infrastructure with robust, security-rich features including intrusion detection and ongoing traffic monitoring, regular vulnerability assessments and next-generation software, firewalls and patches to keep hackers out and firm assets secure.
But beyond technology safeguards, today's successful financial firms require the wherewithal to implement comprehensive cybersecurity programmes – whether you're a seasoned firm or embarking on your first investment venture. The most effective cyber programmes will focus on four critical administrative areas: (1) developing comprehensive security policies and plans to prevent external cyber-attacks or internal breaches, (2) training firm employees on said policies and current cyber threats, (3) cultivating a culture of security awareness from Management down, and (4) managing an effective risk programme via external vendor oversight.
Plan: True cybersecurity defence starts with proper planning. To start, funds need to develop written information security plans – comprehensive documentation of the firm's corporate security initiatives. This should include technical and administrative safeguards being employed to secure confidential data. In the development stage, firms will need to identify systems and plans currently being used, technical procedures and systems in effect, employee access controls relative to confidential data as well as user responsibilities for both prior to and in the event of a data breach.
Unless you’re living under a rock, you’ve at least heard rumblings about the newest app craze to hit the market: Pokémon GO. In existence for a mere 6 days thus far, Pokémon GO has already amassed more daily users than Twitter and Snapchat. And we’re not just talking about kids and millennials here. The app seems to be, perhaps unexpectedly, popular with users of all ages.
The potentially big concern to be aware of is the information users are making accessible to the app’s developer, Niantic Labs. To play the game, a Google login is required (unless you have a login with Pokémon), meaning the permissions you grant to the app include giving access to your full portfolio of Google accounts. That means email, contacts, calendar, photos and files. Even scarier, if you use Google Apps for Work, what information are you unwillingly providing to Pokémon GO?
If you’re a public cloud user and leverage Google Apps for corporate purposes, it’s worth taking the time to research the potential privacy and security impacts if your firm’s users also happen to be Pokémon GO users. At just six days old, there’s likely plenty more to be learned from the app, and the developer will likely be sharing more information in the near future on security permissions and settings.
At Eze Castle Integration we often reference data center tiers (i.e. Tier II and Tier III) in our written materials and assume readers will automatically understand the value of these distinctions. In some cases this might be a safe assumption, but you know what they say about assuming so we’ll do a refresher in this blog post.
Data center tiers – Tier I to IV – represent a standardized method to define the uptime of a data center. The tiers are useful in measuring:
Data center performance
Return on investment (ROI)
Categorized under: Cloud Computing
When assessing technology options and evaluating outsourced IT providers, there are a number of questions hedge fund managers should be asking in order to make the best decision for their firms.
As we talk with investment managers – especially those whose firms are considering a move to the cloud – we’re hearing many of these great questions on an increasingly regular basis. One particular area where there tends to be some confusion, however, is the topic of audit standards which govern service organizations and the data centers they manage on behalf of client firms. To help you navigate through the evaluation process, we’ve pulled together a guide to understanding audit terminology and industry standards.
There is a lot of change happening across the investment management industry, as hedge funds and alternative firms deal with uncertain markets, regulatory pressure and a fiercely competitive landscape. As a result, hedge funds are becoming smarter and thriftier. Budgets are tightening, and with increased demands from investors and regulators, funds now face greater challenges than ever before.
A key challenge in today’s landscape is weighing cost versus benefit when it comes to maintaining internal hedge fund operations and technology. Back in the aftermath of the 2008 economic crisis, operational cuts were made across personnel, infrastructure and everywhere in between. Funds rebounded in recent years, but with global challenges (e.g. Brexit) looming and a tough economic market for investments, fund managers are once again looking to maximize efficiency and operations across the organization.
How does a firm go about maintaining their existing levels of performance and efficiency while also trimming costs and anticipating changes that cannot yet be defined? Determining what a fund should be evaluating is half the battle; developing an actionable game plan and executing it is the hard part.
Hedge Fund Staffing
People are the foundation of a company no matter what the size. Ironically, managing the day-to-day operations are not tasks that investment professionals typically have experience with or have much interest in. In order to create a performance-driven hedge fund operating staff, fund managers should identify and define the roles and responsibilities of each staff member.
Setting individual and group goals and objectives, as well as a clear method for achieving these, is one of the most important things a fund can do in order to maintain an effective, scalable staff. If a hedge fund does not have a sound staffing and operating model, managers may find that certain operational tasks are not being fulfilled, which could lead to portfolio or compliance risk.
There's a lot to be mindful of when it comes to cybersecurity. Experienced and savvy hackers. Insider threats. Regulatory guidance updates and subsequent enforcement actions. The list goes on. So how do today's hedge fund and private equity firm managers navigate the changing landscape and stay above the fray? It all starts with planning.
If you missed it, our recent webinar with law firm Sadis & Goldberg explores the regulatory climate for investment firms, recaps recent SEC enforcement actions and the variance in how compliance is evaluted, and provides practical and actionable advice for fund managers looking to address insider threats, education awareness and policy gaps around information security.
If you have a free hour, this one's worth your time.