Private equity and other alternative investments have been making headlines with their unprecedented success. While this has led to tremendous capital pouring into the space, it has also resulted in intense interest from cyber-criminals as well, making cybersecurity a growing concern for many firms. Many small one-man shops and fund managers brainstorming how to start a private equity firm do not give enough weight to cybersecurity procedures.
Agio, an expert IT outsourcing for hedge funds and private equity firms, warns that this can lead to disastrous future problems. As a cybersecurity expert, a potential breach could occur in any number of scenarios, ranging from falling victim to simple phishing attempts, losing money through wire transfer fraud, or even severe data breaches from poor cybersecurity practices on the cloud.
The Consequences of a Breach
For many private equity firms of hedge funds, one of the first steps is to emphasize the potential dangers and risks of any sort of data breach. In the most severe cases, where sensitive client information is accessed without authorization, notifications would have to be sent out to multiple state attorneys general – leading to fines, damage to the firm’s reputation, and even loss of investors.
How Education can Foil Common Digital Threats
Some of the most common cybersecurity threats to alternative fund managers, both small and large, include phishing and wire transfer fraud. Both are easily combatted with proper employee education, especially non-technical employees that are part of deal teams or valuing portfolio companies. Every employee will have different levels of exposure and technical knowledge, which makes it important to understand exactly what information needs to be disseminated in order to minimize downtime.
Identifying and Addressing Vulnerabilities
A recommended method is through a DDQ, or due diligence questionnaire. A DDQ provides a way to audit the capabilities and vulnerabilities of your firm, including employee knowledge. However, the process of creating, executing, and following-up on a DDQ can be a daunting process for many small shops.
Fortunately, the process can be managed by a third-party IT vendor, such as Agio. As a specialist provider for financial services firms, Agio can rely on deep experience and industry knowledge to keep your firm secure from all vectors of attack. At the end of the day, creating a culture that emphasizes security begins with the expertise and guidance of an expert.