In the modern business environment, cybercrimes are running rampant. According to Statista, nearly 15 million records were exposed in Q3 of 2022 alone, and although such a number pales in comparison to the 125 million records that were exposed in Q4 of 2020, a total of 15 million compromised records still represents a significant threat to the privacy of clients. Even a single security breach can compromise the assets of hundreds of clients and cause irreparable damage to a brand’s reputation.
In order to proactively guard against cyberattacks, businesses across all industries must get serious about client security, including asset managers such as:
- Private equity (PE) firms
- Brokerages
- Family offices
- Public funds
- Investment banks
When clients partner with a firm to manage their equity, they are trusting that entity with their financial future. The firms that take that responsibility seriously will cultivate trust among clients, strengthen their brand reputation, and promote business continuity. Conversely, those that fail to do so risk exposing their clients to unnecessary dangers and find the continuity of their business in jeopardy.
Fortunately, asset managers can protect their reputations — and more importantly, their clients’ equity — by investing in the right tools, processes, and technologies. Join us as we take a closer look at the biggest threats facing asset managers and highlight how they can bolster their security stances.
The Biggest Security Threats Facing Asset Managers
Though there are numerous factors that can erode an asset manager’s resilience to external security threats, two particularly concerning issues include the following:
Antiquated Technology
Aging technologies simply do not provide enough protection against modern cyber threats. Old-school tech can be difficult and costly to maintain as well, especially if it is no longer supported by its original developers.
Outdated software creates other security challenges as well. For instance, using traditional spreadsheet software can make it difficult to manage and restrict access to confidential client data, which can cause important files or documents to end up lost or otherwise misplaced.
Conversely, modern, cloud-based technologies are constantly enhanced and improved upon by their development teams, thereby ensuring that your technology solutions are always up-to-date, secure, and ultimately functional.
Organizational Opacity
When ambiguity exists amongst teams, departments, and entities, it becomes extremely difficult to manage the flow of information across an organization. Additionally, a lack of organizational transparency can cause friction between clients and the firm, and poor transparency may also open the door to entities being used for illegal purposes, such as organized crime or tax evasion.
Organizational opacity can often be attributed to the technology of an asset management firm. Outdated software can create data silos, which interfere with productivity and raise security concerns.
It is impossible to effectively protect client data if a firm does not even have a clear view of what information it is storing on its servers. Therefore, replacing older, ineffective technologies and processes with more modern solutions is essential for optimizing productivity and maintaining security.
How Asset Managers Can Optimize Security
Asset managers interested in improving their security stance to better protect client assets should:
Reevaluate Document Control Practices
Despite many asset managers largely relying on digital documents these days, some firms still use physical documents. Such firms must reevaluate their document control practices and ensure that all of their files are kept out of the hands of unauthorized personnel. Even asset management businesses that have gone paperless should still periodically reassess their document control practices to ensure that they are on par with the latest requirements.
Regardless of whether an asset management firm has gone digital or still relies on paper documents, however, all firms should adhere to several universal control practices. For instance, all files, whether paper or digital, must be clearly labeled, so team members know which documents contain critical client information and which files contain more benign data. Additionally, asset management firms must implement access control measures to limit who can view client files.
Ensure Compliance with Industry Regulations
As part of their efforts to increase organizational security, asset managers should familiarize themselves with relevant industry regulations and ensure that their businesses are compliant with them. The specific regulations that an asset management firm must adhere to will vary depending on what type of assets and data they manage, and the jurisdiction in which an organization operates is also an important consideration.
Adhering to these regulations will help asset managers avoid fines or other compliance-related penalties while also insulating asset managers from liabilities should their firm suffer a data breach.
Train Staff on Security Best Practices
In order to create a well-rounded security strategy, asset managers must invest in staff training. Keeping staff up to date on the latest security threats, as well as compliance requirements, will significantly reduce a firm’s vulnerability.
Training sessions should educate team members regarding commonly used attack methods, such as phishing, and the sessions should also remind team members of security best practices, such as how to properly handle confidential client data.
Implement Modern Business Software
The best way to protect client data and reduce an asset management firm’s vulnerability is to increase organizational visibility, but understanding exactly how one accomplishes that can be vague. The answer lies in comprehensive business management software.
A dynamic business software solution can break down barriers between core departments like legal, tax, and accounting divisions. Additionally, such a solution will include powerful workflow automation capabilities that serve to boost team productivity and safeguard against human error.
In terms of security, a modern business software solution will support a firm’s other cybersecurity initiatives by providing built-in mandates and sharing permissions. The right software will also create transparency for investors, thereby promoting trust and strengthening a brand’s reputation in the asset management space.
Ready to Get Serious About Data Security? Contact Athennian
Eliminating data blind spots, unifying your tax, accounting, and legal departments, and enhancing your security positioning are likely some of your highest priorities. If such is the case, then you should consider adopting a single source of truth business software, such as Athennian.
Athennian’s business software enables your asset management firm to oversee and streamline core tax, finance, and legal processes using our dynamic technology. With our platform in your corner, your business will always be transaction, audit, and compliance-ready. Book a demo to learn more.
Download the Athennian for Asset Managers Guide
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