The increased reliance on technology to power financial organizations, while beneficial to operational efficiency, has led to increased cybersecurity concerns at Private Equity (PE) firms and financial organizations in general.
Data means everything nowadays, and data security is even more pertinent considering the financial assets managed by PEs. Ensuring cyber protection for the software systems used to manage this data is paramount.
Common Cyber Attacks on PE Firms
Breaches are undoubtedly the most common form of cyber attack suffered by PE firms. Data is the backbone of any PE firm, and if its integrity is compromised through a security breach, the firm’s portfolio investments are no longer secure. The company could suffer huge losses on top of losing its credibility with investors.
Security breaches are driven by malware such as viruses, ransomware, and spyware. One such breach occurred in 2020 where cyber attackers stole almost $1.3 million from 3 UK-based private equity firms.
Spyware is another cybersecurity threat. This is a type of malware that penetrates a network system. Once it has breached the system, the spyware gathers information about an organization and sends it to another entity, leaving the attacked organization vulnerable.
One of the most effective types of cyber attacks is a Distributed Denial-of-Service (DDoS) attack. This attack prevents an organization from accessing its data. A famous example is the DDoS attack on six US banks in 2012 that heavily impacted the banks’ revenue, causing significant customer service issues and mitigation expenses.
What is IT Security Consulting?
Faced with these security concerns, it’s no surprise that PE firms turn to IT security consulting services. However, with such a wide range of IT consulting service options available, you should know what to expect from these services.
IT security consultants identify and address any vulnerabilities to cyber attacks that the financial data in an organization faces. A security solution is then developed based on these assessments to protect the data from hacking, spamming, or any other threat.
An IT Security Consultant will put themselves in the attacker’s shoes, identifying all possible gaps that could lead to a security breach. They will also assess the situation from the victim’s point of view, estimating the potential damage that attackers could cause.
Choosing the Right IT Security Consulting Partner
Your firm’s reputation, revenue, and future are at risk if there are recurring security breaches, so the choice of IT Security Consultant has to be taken very seriously. A PE firm should consider several questions before partnering with an IT security consulting firm.
Where is data stored?
Sophisticated technological options are available. Cloud-based storage locations are typically more secure than having data on a hard disk. Another advantage of cloud solutions is their large and expandable storage capacity.
Is there a backup plan?
Cyber attacks have the power to obliterate your firm’s data, and attackers can demand a ransom in exchange for restoring access to the data. However, an effective backup plan can render such cyber attack strategies futile.
Does the IT security consultant offer full-time support?
Cyber attacks can occur at any time, so full-time malware monitoring and breach detection must be part of the services offered by an IT security consultant.
Does the consultant offer training?
Employees at PE firms need to be trained on quickly recognizing and reporting breaches. Phishing attacks, where attackers send fraudulent emails to staff members, are often used as a way for the attackers to get deeper into your firm’s system. The best defense against phishing is ensuring employees know how to detect it in the first place.
The importance of IT security
IT security is a non-negotiable investment for any financial organization, even more so for private equity. Cyber security issues can lead to lost revenue and credibility. A sizable breach can have detrimental consequences for a PE firm.
Choosing a suitable IT security consulting partner is the first step in protecting your firm from the potentially adverse effects of breaches, should they happen.