Issue 2 • summer 2014
WMA JOURNAL Working for the Investment Community & their Clients
security
As the digital world advances so does the risk of cyber attacks We are seeing more and more cyber training centres opening in the UK to help educate individuals about cyber risk, this recognise the need for all businesses including wealth and asset management companies to consider the impact of cyber attacks in their business. Who would of thought 10 years ago there would ever be a need for such training facilities in the UK?
built up company reputation and customer confidence over a long period of time, these types of leaks can damage your reputation within hours, swift action and a carefully managed PR response is needed to regain client trust. Financial crisis – Third parties who have to compensate their own customers may claim for compensation, while business out of action profits can be lost.
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What should you do? Internet threats are a challenge to wealth management businesses, it is important to start thinking about the use of digital technology within your own businesses and ensure adequate security processes are in place. As cyber threats continue to emerge, your existing security capabilities should be reviewed and upgraded or transformed to manage cyber threats. Another area to consider is reviewing your existing insurance policy, many firms will purely rely on their Professional Indemnity (PI) insurance product however, it should be warned these offer minimal protection compared to a true cyber insurance product. Many PI polices will not cover you for losses such as damages to your hardware and software or notification costs – these are costs involved for a consultant to advise whether you need to notify individuals and the costs associated with doing so. Whereas under a cyber product the exposures are broken down into two key areas 1. First party and 2. Third party (costs incurred by third parties for whom you are liable for following a cyber ‘incident’).
ith more and more customers buying or servicing their products online, many businesses are embracing digital technology to either reduce operating costs or improve customer experiences with clients. With these improved digital developments come an over expanding array of complex financial exposures for wealth managers which makes it increasingly important to take steps to mitigate these risks from your business. What are the threats? Many wealth management businesses work with highly sensitive information, most importantly client data, which is why it makes these businesses so attractive to criminal hackers. Many firms may believe they are too small to attract the notice of cyber criminals, whereas, in fact, it’s the complete opposite! The view is that hackers actually tend to target smaller firms, believing their processes and security is more relaxed. The Federation of Small Businesses revealed that 54% of UK businesses have fallen victim to online crime in the last 12 months. Threats represented by cyber include: Data leaks – Digital data is lost or leaked from company system; it could be data loss from PC, Laptop, mobile device or tablet. IT crisis – IT department need to deal with problems whilst maintaining businesses as usual, understanding how data was lost or taken, can they contain the leak? Reputational crisis – News of data leaks travel fast especially with increased use of social media, many wealth managers have 26 WMA JOURNAL
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Security capabilities should be reviewed and upgraded or transformed to manage cyber threats
First party Hardware cover Physical loss or damage to computer hardware. Business income and extra expense In the event of a cyber incident this cover ensures the business can survive the impact of the loss of business income as a direct result of IT system failure. Crisis management and notification costs Costs incurred in the event of the need to appoint a forensic expert to understand loss of data and impact on individuals concerned – that all comes at a cost. Data cover Cover includes cost to reinstate data following a breach or unauthorised access. Third party Privacy breach Liability arising from such breaches. Virus transmission Transmission of a virus to third party which results in triggering damages to their IT systems. With the average cost of the worst security breaches for small organisations between £35,000 and £ 65,000, all companies, large or small, should start to take the threat of cyber attacks seriously. Lark Group Limited specialises in providing financial institutions insurance advice and are an affinity member of the Wealth Management Association. Contact Martin Camp, Financial Institutions Division at Lark (Group) Limited, on 020 7543 2806 or email: martin.camp@larkinsurance.co.uk for further information, or a review of your insurance policy. Alternatively, please visit www.larkinsurance.co.uk/ financial-institutions www.thewma.co.uk
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