The Importance of Cyber Security for Hedge Funds

Hedge Fund Cybersecurity

If you offer financial services, you’re under threat of cybercriminals. The finance industry is exposed to various cyber threats, from phishing attacks to the data breach. Companies that don’t protect themselves against these cyberattacks are in constant danger.

They’re at risk of losing everything: reputation, clients, and, most importantly, profit.

Hedge fund managers especially need to worry about cyber security issues like spear-phishing and phishing since they’re responsible for both investors’ money and other employees in the company.

Managers shouldn’t just create investment strategies. They need to think of protection strategies so their business information stays safe.

Keep Your Hedge Fund Secure!

We’ll keep your hedge fund safe so you can focus on business growth and economic gains.

Our solutions will give you peace of mind and safeguard your fund’s future.

Raffi Jamgotchian Hedge Fun Cyber Security Expert

Hedge fund’s digital assets include personal and financial information of clients, trading models and business strategies, portfolio positions, and other critical data that must be safe from cyber-attacks.

Luckily, there are lots of ways you can protect yourself and your company against attacks. In this guide, we’ll try to give you an overview of the two main cyber threats and suggest measures you can implement to stay safe.

We’ll also provide you with solutions in case your data security is already compromised.

Your risk management will improve if you put together a quality cybersecurity program. So let’s get right to it.

Cybersecurity Challenges Hedge Funds Face Every Day

Hedge funds are targeted mostly for the financial gain of attackers but sometimes they can be targets of corporate espionage. Investment firms can also be attacked by disgruntled employees.

For the most optimal response, you should know what kind of cyber attacks are most common for hedge funds, investment banks, and other financial companies.

Phishing Attack

phishing attacks affecting hedge funds

Business email compromise (BEC) or phishing is the most common threat for the data breach. The attackers can use websites or emails to present themselves as a legitimate business.

Visitors to the fraudulent website or receivers of fake emails are tricked to give sensitive information such as social security numbers, login IDs, passwords, etc. Fake email messages can also spread malware (malicious software) (via attachments and links) that can access networks and steal the data.

This type of data is then used for identity theft or money transfer.
In the finance world, phishing attempts are much more serious since the firm’s network holds sensitive information about lots of other companies and people.

If that data is compromised the damage is measured in millions of dollars.

For detailed info, you can check our article on Phishing Attacks.

Protection from Phishing

Educating employees and your colleagues about the dangers of phishing is something you can do as a hedge fund manager. Create guidelines and recommendations on safe internet browsing and organize cybersecurity awareness training.

You want your employees to be able to identify risks so they can protect company assets.

You want to limit human mistakes as much as possible. Start with something simple. For example:

  • Don’t use personal laptops or mobile devices for work because this will give the attackers easy access to the firm systems, networks, and sensitive data.
  • If you’re giving remote access to employees make sure the protection methods are maximally secure. Having two-factor authentication and a password manager will strengthen security protocols.
  • Everyone should avoid responding to suspicious email messages of unknown senders. A phishing email might look legitimate but you want to be sure who exactly is on the other side. Naturally don’t respond with personal or sensitive information anyway.
  • Avoid clicking on hyperlinks and attachments if you aren’t absolutely sure that they are from a safe sender.
  • Carefully examine the web or email address. Phishing websites, emails, and links often use addresses that look correct but often have misspelling.
  • Leave the website that immediately displays pop-ups that are asking for your information.
  • Learn to recognize a fraudulent email and website, from the most obvious ones (“you won the lottery” type”) to the more subtle ones (good sounding business offer).
  • Make sure your employees aren’t revealing information on social media that could be used for phishing (or any other cyber) attacks.

 These methods of safety aren’t enough in the finance world where threats are much more complex. That’s why you should also implement protection software. All employees should use browsers with anti-phishing detection and your security system must be up-to-date so you can be protected from the latest threats.

Hackers are getting better each day so our protection system must also be involved.

Triada Networks is always working on improving cybersecurity methods against phishing and conducting regular security controls for all our clients.

Ransomware

Hedge funds are also a common target of ransomware threats. Ransomware is cyber-extortion tactic Attackers use malicious software that encrypts the files and demands a ransom to restore access to the data. It’s basically holding the computer system as a hostage.

Watch our video on the topic!

Funds can’t perform their critical operations, which causes them serious losses. Some targets choose to pay the ransom to avoid losing profits and risking client lawsuits. However, if you have a quality cybersecurity system, you don’t have to negotiate with criminals.

The financial and medical industries are especially prone to ransomware since they are vulnerable and because victims often pay the ransom. In 2017, 90% percent of financial institutions reported being targeted by ransomware attackers and that problem is still widely present.

Attackers usually demand a certain sum of money to keep client data confidential and to return the control of the system to the victim.

This is a serious threat that can happen to your hedge fund if you don’t have the right protection system.

Protection from Ransomware

The priority is to install a cybersecurity system that will protect business information and keep operations running all the time. However, installing security systems is just the beginning.

You need to constantly conduct risk assessments to make sure your network is safe from the latest threats. Updating protection software and implementing the latest measures are of utmost importance.

Hedge fund managers have loads of other responsibilities, so they don’t have the time (and often enough knowledge) to perform regular controls of security systems. After all, everyone has different types of expertise.

Working with service providers that offer security and protection from cyber attack might be the thing you need to keep your cyber security in check. You don’t have to install enterprise security systems but you need to have at least minimal protection that’s regularly updated or you’re risking serious losses.

Make sure you carefully pick your service provider because your entire company’s reputation and profits will depend on it.

Know that the bigger your profits are, the bigger target you’re becoming for hackers. Hedge fund firms are in danger of becoming cyber hostages so don’t let that happen to you.

With the help of cyber security experts, you can make a resilience plan (back-up and data recovery) and keep your critical operation running even if you’re under a ransomware attack.

Importance of Conducting Due Diligence on Third Parties

importance of due diligance

Hedge funds are working with a lot of third-party businesses, which can pose a cybersecurity risk if due diligence (or the investigation) of said businesses hasn’t been conducted. Before entering any kind of agreement, hedge fund managers need to consult both the legal and IT department of the company.

The manager should also ask for up-to-date information on the third-party’s cybersecurity standards. You don’t want to work with brokers, custodians and other third-party firms that don’t have secure systems and neither will your investors.

Sophisticated and tech-savvy investors nowadays expect that hedge fund managers to investigate each service provider with care.

Nobody wants their sensitive information to be exposed because the security practices aren’t the number one priority.

In other words, being loose with security measures, from updating cyber security systems to conducting due diligence on third parties, can and will cost you lots of money.

Conclusion

Implementing risk management strategies must be your top priority, whether you’re just starting up a hedge fund or you’ve been in business in a while. Outsourcing this responsibility to experts can hugely lessen the burden. Triada Networks will provide you with long-term protection by:

  • Using advanced technology to protect your hedge fund from various cyber threats.
  • Conducting regular safety controls
  • Creating incident response plan for data protection
  • Implementing strong password protection and multi-factor authentication systems
  • Empower employees with knowledge about cyber security to become the first line of defense.

Schedule a free consultation now and secure your assets today!

Keep Your Hedge Fund Secure!

We’ll keep your hedge fund safe so you can focus on business growth and economic gains.

Our solutions will give you peace of mind and safeguard your fund’s future.

Raffi Jamgotchian Hedge Fun Cyber Security Expert

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