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.
The technology treadmill is a tough place to be these days. Technology refresh cycles last only a mere three years, forcing firms to replace their infrastructures and make costly software and hardware upgrades on a too-frequent basis. And with hedge fund budgets tighter than ever, many firms cannot afford to stay on this path.
But the hedge fund technology treadmill is not a firm’s only option. Costly in-house, 'traditional' IT services have given way to more cost-effective outsourced IT and managed services that get firms off the treadmill and on a path to success.
Let’s have a look at some of the key reasons why hedge funds and other investment management firms are moving from on-premise technology infrastructures to cloud and managed services.
Keys factors driving hedge funds to managed services
Many firms are turning to managed IT services because it allows them to align their IT requirements with their business needs, including tighter control on budgets and staff. Moving to a managed service platform provided by a reputable outsourced IT provider not only makes it easier to deploy technologies, but also allows firms to benefit from platforms inherently designed to meet the constraints of limited IT resources and budgets.
When it comes to cybersecurity, the list of haves and have nots is constantly evolving due to the changing regulatory and threat landscape. In case you missed it, we hosted a webinar this week on Cybersecurity Basics for Asset Managers, during which we uncovered various elements within three primary cybersecurity layers: from Tier 0 (Basic Protection) to Tier 1 (Industry Standard) to Tier 2 (Advanced Protection).
How does your firm stack up when it comes to your cybersecurity practices? Watch the replay below and find out where you fit in.
Tier 0: We call this level Tier 0 in part because, well, there’s zero chance your firm will have long-term success in thwarting cyber risks if you don’t employ these basic security measures.
When evaluating a cloud services provider there are a lot of factors to take into consideration: features & functionalities, security protections, provider experience, and industry certifications just to name a few. We've identified some of the most important questions today's investment management firms should be asking cloud services providers during the selection process.
Five or seven years ago, these questions would probably be fairly basic in nature. Does the infrastructure isolate individual client environments? (Yes). Can the cloud environment scale to meet a firm's growing resource needs? (Yes). In 2017, we can safely assume you understand the basics of the cloud, so the questions we've identified move beyond the basic and focus on critical infrastructure, security and support questions your cloud provider should be able to address.
Top Ten Questions to Consider:
I'm most concerned about the security of my data. What types of security layers do you employ across the cloud platform and your broader organization to guarantee the safety of my firm's information?
Does your cloud leverage proactive security technologies such as intrusion detection and prevention, next-generation firewalls and regular vulnerability assessments and/or penetration tests?
Public Wi-Fi networks are incredibly convenient and can be a great resource for airport layovers, coffee shop meetings or lengthy train commutes, but alongside convenience are a host of unnecessary risks. On open, unsecure networks, information is generally unencrypted, meaning with the use of a wireless network analyzer, it’s fairly easy to see what others are up to. What attackers try to do is intercept the communication between your computer and the computer you are sending information to so that they can gather useful information. A hacker, for instance, can see what webpages you’ve visited and what credentials you’ve entered into forms.
Common attacks that occur on public Wi-Fi include:
Man-in-the-middle attacks (MITM)
Attackers will set up their own network between your computer and the computer you are connecting to so that all the information you enter is first routed through their device.
The Internet of Things (IoT) is what allows us to connect all of our devices to the Internet - these devices that we use every day to make our lives easier, more efficient and, most of the time, safer. IoT devices can be usually be monitored or controlled from a remote location. For example, we use baby monitors and cameras to watch over our kids and houses, apps to control the temperature and lights in our homes, and webcams chat with long-distance friends or conduct business meetings and interviews. Although there are enormous benefits to streamlining and connecting these devices across both business and personal settings, the Internet of Things can also pose a real threat to the security posture of both an individual and an organization.
Like the recent DDoS attack which brought down major sites such as Twitter, Reddit and Netflix, sophisticated hackers can take advantage of these everyday IoT devices to gain access to networks and sensitive information. For example, hackers can release malicious malware onto the Internet that looks for vulnerable devices, including IoT devices. Once a device or devices are detected, the malware is then able to get into the network and cause disruptions, potentially leading to users losing control of functionality, shutting down of websites, or theft of information.
One concern is that when developers design IoT devices, they often overlook the software needed to protect consumers. In many cases, they may be more concerned with functionality, design and the value said device will bring to users. IoT devices are easy to attack because they usually connect to the Internet by default and use stock code from open source software. Developers also can’t assume that consumers know the risks they face when using IoT devices. While robust security features, such as firewalls, can't truly be installed within IoT devices themselves, in the future designers need to pay closer attention to security to prevent devices from becoming easy targets.
In Part Three of our Risk Outlook Webinar Series, Michael Corcione, Managing Director of Cordium, spoke about compliance and cybersecurity trends in the investment industry. Although cybersecurity risks and struggles can vary from firm to firm, it is important to address a number of key areas.
Continue reading for quick takeaways or scroll down to watch the 30 minute video replay.
Good security can be achieved as firms move from reactive to proactive strategies. Firms usually start with the goal of checking the box for regulators, but they need to get beyond the 'check-the-box' exercises and test controls. The SEC’s 2015 cybersecurity guidance update provided more specific insights on cybersecurity focus areas for investment firms - governance and risk assessments, training and awareness, incident response, data loss prevention, access rights controls, and vendor risk management. Hedge funds and investment firms should use this as a framework, understand how they have addressed these areas and where they need to improve.
A good cybersecurity program starts with the leadership team, and they need to set the tone from the top down. This way everybody understands the impact of risk and its effects on the firm. Leaders should acknowledge risk, understand risk, and lead ongoing discussions firm-wide.
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.
Private equity firms have been slow to embrace outsourcing, but managing data and technology is more complex than ever. With increasing regulatory requirements and a growing urge to focus on core competencies, PE firms are shifting their views of the back office. As such, we're examining the changing tide for private equity operations and how CFOs, CTOs and fund managers alike can control operating costs, maximize efficiency and better perfect operational workflows.
Drivers for change.
The number one reason for managers to make the switch to an outsourced solution is the desire for managers to get back to their roots. The idea of back office transformation is really founded in that managers have found themselves spending much more time doing everything but raising money and investing money.
Beneath this layer, back office transformation is also driven by regulation, investor transparency, the lifecycle of a private equity firm, and global reach. Slow adoption, fast results. The private equity sector has been slow on the uptake when it comes to outsourcing, and we contribute this lag due to lack of education on the process and benefits of outsourcing. In the past three to five years, adoption in the PE space has increased because it is cost effective, secure and feature rich. Private equity firms that have made the switch wonder why others are not doing the same. The idea of leveraging an experienced managed service provider is one that private equity firms have really embraced because there is no burden for firms to hire and attract talent, which can be challenging and expensive.