With cybercriminals employing ever more sophisticated methods, cybersecurity has never been more important to hedge funds and other alternative investment managers.
In our digital age, a criminal can steal millions of pounds without ever even setting foot inside the UK. In the UK a reported 51% of people have been a victim of cybercrime, making the UK one of the most attacked countries in Europe.
In light of this, cybersecurity in the financial service industry has been put in the spotlight. However, it doesn’t always take a skilled hacker for sensitive information to be leaked – any number of human errors or natural events can lead to information ending up in the wrong hands or being made unavailable. Hedge funds are just one of a number of financial services entities under ever increasing pressure to improve and update their cybersecurity systems to combat such issues.
What is Cybersecurity?
Cybersecurity is the combination of systems used, both on a technological and personal level, to protect information infrastructure against confidential data and information being accessed by an unauthorised party. This sort of data can range from employee details to sensitive financial company information. Leaking of this information can have catastrophic consequences for a company of any size and on a number of different levels.
So serious are the issues surrounding cybersecurity, that the UK Government is currently implementing an £860 million national security programme.
Why is This Important to a Hedge Fund?
Action – Not Reaction
As a hedge fund, you are naturally responsible for storing data of a highly sensitive and private nature, including the confidential financial information of clients. With access to this information, a cyber-criminal could earn his or herself a huge profit – thus making hedge funds an extremely likely target for cybercrime. It’s for reasons such as this that hedge fund cybersecurity should always be a forethought and not an afterthought.
Downtime or a delay in your systems caused by a security breach or any event that compromises the integrity or availability of information a hedge fund has access to, can mean you’re not receiving accurate, real-time market information. This means your assessment of the risk involved in making a decision will be outdated and can cost the company a large sum of money as a result of that decision being made incorrectly.
The obvious legal fallout that will follow a leak of confidential client data due to poor or not up to date cybersecurity can be devastating. With privacy laws and the Data Protection Act, if a leak occurs, it can lead to clients taking up a lawsuit with the company or huge fines being imposed by the ICO (Information Commissioners Office).
Potentially one of the largest costs in the long run following a successful cyber-attack is repairing the damage done to the company reputation. This can take years to achieve and will ultimately cost the company a huge amount of resources trying to regain the lost trust – although it can often be an irreversible symptom of a serious security breach.
Ultimately, if it isn’t already, cybersecurity should be a priority for any hedge fund. At Capital Support we provide managed cybersecurity services to a number of regulated firms; contact us if you’d like to learn more.