When it comes to cybersecurity there are many factors that you need to be conscious of. During a recent webinar, speakers from Eze Castle Integration and Wolf & Company shared 10 of the most common cybersecurity gaps identified during an IT audit/risk assessment. We’ve listed the top 10 below and shared some particulars on a few of the most critical (in our opinion). For more detail on how these gaps are presenting themselves – and also best practices for avoiding them – click here to listen to the full webinar replay.
Top 10 IT Security Gaps
Risk Management and Governance
IT Asset Management
Social Engineering & User Training
Business Continuity Planning
Third Party Vendor Management
User Provisioning and Management
Incident Response Planning/Procedures
Risk Management and Governance
Responsibility and accountability for risk management starts in-house – and at the top. Even for firms that rely on third party outsourced providers, it’s imperative (and often overlooked) to establish governance controls and outline who internally maintains ownership of the firm’s security posture – and more broadly, who owns the firm’s risks.
Post-launch, many hedge funds and investment firms struggle to gain ground and attract the institutional capital needed to succeed in today’s competitive market. As firms grow – and bandwidth and budget are less likely to be roadblocks – it can be a challenge to reinvent the wheel and position your firm to capture institutional dollars.
During a recent webinar, speakers from EisnerAmper and Eze Castle Integration explored trends in hedge fund operational due diligence and technology operations and offered advice for asset managers looking to grow out of their startup boots and achieve an institutional grade operation. Some areas they explored during the 40-minute webinar include:
How institutional investor expectations have changed for firms at the pre-launch and post-launch phases;
The importance of (and detriment to not) passing an operational due diligence examination;
How cyber security expectations are evolving to increase standards across both technology infrastructure and policy planning;
If the public cloud is suitable for investment management firms looking to solidify institutional investments; and
Top mistakes emerging managers make that prevent successful ODD exams and institutional evolution.
Scroll down or click here to watch the replay.
Last week, we shared some important questions to include in hedge fund technology RFPs, focusing on Staffing, Client Service Model and User Support. In today’s article, let’s dive back into the RFP process, and look at some questions on Business Continuity & Disaster Recovery Plans, Backup & Retention of Information, Data Security and Intrusion Detection & Incident Response.
Business Continuity & Disaster Recovery Plans
Does your company have a written policy and program in place for business continuity and disaster recovery?
Have your company’s policies and programs for business continuity and disaster recovery been fully implemented? If not fully implemented, please discuss those areas in detail and explain any plans to address them.
They say the more things change, the more they stay the same. Turns out it’s a pretty accurate assessment of the hedge fund industry then and now.
You see, back in 2011 we hosted a “State of the Hedge Fund Industry” event that yielded some interesting trends and perspectives, and we thought it might be fun to not only look back at those trends, but compare them to what we’re seeing in today’s industry – more than five years later.
Like I said: the more things change, the more they stay the same.
Hedge Fund Market Trends & Challenges
THEN (2011): It’s been an interesting year thus far for hedge funds and other alternative investment firms, as inflows have been high but performance low. In addition to performance challenges, hedge funds continue to deal with increased competition for investments, and thus asset-raising remains a hurdle for many funds – regardless of their size or strategy.
Happy New Year! Seeing how the calendar now reads January (we're still in denial, too) and there are a number of weather systems being monitored across the US, we thought it might be best to kick off the year here on Hedge IT with some helpful weather-related business continuity tips.
Here are eight to keep in mind as the next winter storm approaches.
1. Determine how/where your employees will work in the event of a winter weather scenario.
Some firms opt to identify a secondary work site, but in the event of a widespread or regional event, you may find that location is inaccessible also. You should also consider if transportation is/will be impacted by the weather. If road conditions are bad or public transportation is shut down, employees will have to remain home.
If your firm supports remote access capabilities, ensure employees are prepared with the necessary infrastructure, workload expectations and communication tools.
2017 is already shaping up to be an interesting year. With a new presidential administration taking office and the hedge fund industry coming off the heels of a challenging year, there’s a lot to keep an eye on. We recently hosted a panel with law firm Morgan Lewis to discuss these and many other topics as part of our “2017 Outlook for Hedge Funds: Risk, Regulation and Technology” event.
Read on for some of our panel’s key takeaways.
2017 Regulatory Outlook
While little is known about how a Trump presidency will operate, there could be potential tax savings for managers depending on how the administration chooses to regulate Wall Street.
Firms should expect to see reforms with the Dodd-Frank Act and the Volcker Rule, which could add more competition into the marketplace if limits on bank investments are adjusted.
SEC Focus Areas
Top six areas of focus for the Securities & Exchange Commission will likely be: (1) expenses and fees, (2) trade allocation, (3) material non-public personal information, (4) valuation processes, (5) operating partners and due diligence, and (6) security, privacy, insider trading and business continuity.
Cybersecurity is not necessarily part of every SEC examination, however, the bar will continue to be raised in terms of preparations firms will need to employ.
In 2016, the SEC provided additional guidance on business continuity and transition plan requirements, highlighting the need for hedge fund and financial firms to maintain their fiduciary responsibility to their clients and investors.
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.
As of Wednesday, October 5, 2016, computer models continue to show Hurricane Matthew traveling along the southern eastern states starting in Miami early Friday morning and reaching Norfolk, VA early Monday morning. At this point, it’s too early to determine if Hurricane Matthew will head out to sea once it reaches Virginia or continue up to the Northeastern states.
Whether you’re in the south or north, now is the time to prepare your office and home for a potential impact of the storm. The following is a high level review of continuity steps you should consider:
Communicating with Employees
If you haven’t already, create a communication process to ensure you can notify your employees and/or clients. For internal communications, you can use an employee call tree which can be created in word or excel, create a distribution list in your mobile device or subscribe to an automated notification system. Firms must ensure messages are communicated to employees (or clients) properly and in a timely manner. Using a process will ensure all employees receive the same message immediately via email, phone call and/or text message. Whichever method selected, ensure there is a dedicated employee that is aware of their role and prepared to send the communication when appropriate.
Employees’ Work Locations
If your plan is to have employees work remotely should an incident occur, steps should be taken to ensure that employees will have access to all required resources for performing their daily tasks. This includes checking to see that the company has adequate Citrix licenses and having employees do a test run.
To avoid questions and confusion, work location procedures should be clearly communicated to all employees in advance to ensure that any unexpected challenges are dealt with before any disaster.
Employee Remote Access Test
Before Hurricane Matthew reaches your office or home, validate employees have all of the required resources to work remotely. You can validate this process by having key employees do a remote access test to ensure any issues are addressed before an incident impacts your office. Here are some recommended steps to have your employees follow as part of the testing process:
Validate successful communication to internal and external dependencies
Confirm full functionality of required applications
Perform all critical business functions
Confirm access to vital records (key files and documents)
Ensure employees can receive incoming calls, while working remotely, by activating phone recovery procedures or using phone redirect instructions
Disaster Recovery Activations
Depending on the impact of Hurricane Matthew, some firms may need to activate their disaster recovery systems. We recommend you review the activation procedures now to ensure a smooth transition of the systems, if needed.
The recent explosions that rocked the Chelsea neighborhood of New York City and the town of Seaside Park, New Jersey remind us all that we can never be too prepared for an emergency situation. Following are a few reminders to ensure the safety of your employees and the business continuity of your firm during these types of disaster scenarios.
Assessing the Scenario
Every scenario is different and lends itself to a certain degree of impact, whether it’s confined to an office building or a broader regional impact. Start with ensuring that your employees are accounted for and in a safe location. Then consider: will the events at hand impact their ability to continue with their jobs? Obviously, if the office space is affected, a secondary location may come into play, or firms may opt to allow employees to work remotely. Next, review critical business systems, data and resources. Are your data and assets up and running so employees can continue business functions? Are phone systems or email functioning properly?
Internal and External Communication
Depending on the severity of the situation, you’ll need to determine the level of communication to both internal and external parties. If the event or disruption will impact employees getting to or from the office or if the building is inaccessible, obviously you’ll need to notify personnel. If there may be an impact to the business itself (trading, for instance), you may want to communicate with external parties such as investors, business partners, and/or regulators. It’s helpful to have a communication plan in place to guide this process. And remember: all communications should be reviewed and approved by the individual(s) overseeing the business continuity program and the plans associated with it.
Categorized under: Business Continuity Planning
During Part 2 of our Risk Outlook Webinar Series we spoke with Eze Castle Integration Director Dan Long about how investment firms should address evolving cybersecurity risks, third party service provider oversight and employee training and education. Many of the points Dan addressed highlight questions hedge funds and private equity firms should be asking themselves.
Read on or scroll to the bottom to watch the full, 30-minute replay.
What is our commitment to cybersecurity and what is our outlook on the future?
Regulators and investors continue to ask more questions about cybersecurity because they want to know that firms are effectively mitigating risk. To meet these growing expectations, firms must demonstrate that you take cybersecurity risk seriously and have implemented sound systems, policies and procedures to combat those risks. As the threat landscape and technology continue to evolve, investment management firms need to evolve accordingly and develop better ways to counteract threats. Firms don’t necessarily need to implement every available security technology, but they should be keenly aware of their options and have a plan to effectively mitigate as much risk as possible.
How are we addressing third party risk and oversight?
Investment management firms often rely on third party vendors to obtain functionality or capabilities that they need, want or can’t afford to produce on their own. But moving functions out of the firm's control can present challenges. With any outsourced function, the firm inherently takes on additional risks at the hands of the third party. But it's critical for investment managers to limit those risks through sufficient due diligence. To combat vendor risk, financial firms need to maintain strict oversight of all third party relationships and investigate security practices and protocols, particularly for those vendors who have access to the firm's confidential information. An outsourced vendor should be providing the same level of security (or better!) as your firm would if the function was under in-house control.