Digital Transformation and Cybersecurity: The ROI of a Trusted Partner

Alternative investment firms – those that deal in private equity, venture capital, hedge funds, commodity and derivatives trading – must continually adapt to regulatory, economic and geopolitical pressures. Increasingly, they look to digital transformation (DX) for the agility to respond. A digital-first strategy enables them to gain new customer insights and deliver frictionless customer experiences. 

But a growing number are realizing that cybersecurity must be embedded into their DX efforts. For starters, malicious actors are always looking for new attack surfaces, especially in financial firms, and new technologies give them new potential inroads. What’s more, bolting on cyber safeguards after digitized processes and services are in place results in piecemeal protections that don’t drive customer and regulator confidence. 

These insights are derived from the findings of a recent ECI-sponsored report by IDC, “Cybersecurity and Digital Transformation of the Global Alternative Asset Industry: A Critical Pairing.” The study surveyed 400 executive-level decision makers at alternative investment firms in North America and Western Europe. 

A key takeaway? Crucial to achieving strong return on investment (ROI) in DX and cybersecurity is partnering with a trusted managed services provider (MSP) or managed security service provider (MSSP) for cybersecurity related expertise and solutions. 

DX Challenges and Opportunities 

An earlier IDC study revealed that most firms are benefiting from DX. Top-five improvements include innovation (27% of respondents), reduced risk (27%), customer satisfaction (26%), revenue (24%) and profits (21%). Revenue and profit improvements are key, because they point to returns on DX investments. 

But the ECI-sponsored study shows that challenges remain, especially with cybersecurity. The three biggest DX concerns are security and privacy (57% of respondents), cost for benefit (49%) and risk management (35%). These factors are exacerbated by the one-two punch of growing cyber threats and expanding regulatory reach. Risk, compliance and security staff are under tremendous pressure to provide access to data while ensuring resources aren’t vulnerable to breach. 

These drivers place cyber planning front and center, especially for DX initiatives, which can impact every aspect of firm operations. Among survey respondents, the top five areas of focus for DX and cyber planning are: 

• Risk assessment management (47%) 

• Security strategy and road map (42%) 

• Chief information security officer (CISO) as a service (40%) 

• Incident response planning and support (40%) 

• Governance management (39%) 

ROI of an MSP/MSSP 

It should be no surprise, then, that fully 80% of firms say cybersecurity consulting services are crucial to their DX efforts. 

After all, in-house cyber staff must grapple with competing priorities and resource constraints. Threat monitoring is a 24x7x365 undertaking that requires robust knowledge, data and tools. Threat analysis and escalation are time-consuming and time-sensitive. Emerging cyber risks require continual investments in new tools and technologies. And industrywide competition for cyber experts results in high turnover and staff shortages. 

A more secure and cost-effective approach is outsourcing cybersecurity to an experienced, trusted partner with the latest threat knowledge, cyber protections and response best practices. One whose core business is protecting financial institutions, mitigating cyber risk and freeing up firms to focus on winning in the marketplace. 

As more firms recognize these imperatives, a greater number will outsource security. Reliance on an MSP/MSSP for cybersecurity will more than double from 12% in 2022 to 29% in 2024. At the same time, use of in-house security staff will almost halve from 23% in 2022 to 13% in 2024. 

The Right Cyber Services for Effective DX 

Alternative investment firms are looking to an MSP for turnkey solutions that mitigate their cyber risk. Their top five reasons for working with a trusted partner are: 

• Establishing discrete security programs such as vulnerability management and access management (53%) 

• Outsourcing for cyber expertise (46%) 

• Leveraging emerging cyber tools (45%) 

• Gaining visibility across cyber controls (43%) 

• Streamlining the complexity of managing point cybersecurity products (42%) 

Benefiting from an MSP enables firms to focus on their core competencies. They can achieve a stronger security posture, improve regulatory compliance and build customer trust – all more cost-effectively than managing cyber programs themselves. Just as important, they can advance their DX journey while ensuring the robust cyber protections that allow them to compete and win in the marketplace. 

For additional insights and research into the state of cybersecurity and DX in the alternative investment arena, download Cybersecurity and Digital Transformation of the Global Alternative Asset Industry: A Critical Pairing today. 

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