Technological advancement in the asset management industry is undoubtedly a double-edged sword. Used strategically, it can bring forth better visibility, streamlined workflows, and higher returns. When mismanaged, the results can be harder to swallow, presenting increased risk in terms of data privacy and security.
Nicsa members explored this issue in depth during a recent #WebinarWednesday event moderated by Lisa McLaughlin, VP - Risk Advisory at SS&C Technologies, Inc., and featuring experts from Arendt, Brown Brothers Harriman, LuxCSD S.A., and Sage Advisory. (Nicsa members can replay an archived version of the webinar here).
Mehtap Numanoglu Tasiopoulos, Chief Risk Officer & Executive Committee Member at Brown Brothers Harriman, outlined core issues in terms of the increasing cyber risk across the industry:
Tasiopoulos credited generational differences, increasing regulatory requirements, and increased interconnectedness (think smart phones, smart homes, and smart offices), for reshaping business as usual.
“Regulators around the world are working to align cyber initiatives, which are many, to come up with a common taxonomy about the cyber risk language,” she said.
Martin Dobbins, CEO & Founder at Sage Advisory, touched on data breaches, cyber resiliency, and recovery plans.
“Actively engage with your IT specialists,” he said. “Create an open-door policy enabling them to have discussions around what’s happening with the firewall, what’s happening with phishing, and what the business continuity and resiliency plan is. We encourage managers and boards to have a dialogue rather than rely on formal reports.”
Carolyn Linnevers, Comité Exécutif & Company Secretary, LuxCSD S.A., said that worldwide we are seeing a major shift toward digitizing business with process automation, devices connected to the Internet of Things (IoT), cross-border networks, and increased outsourcing.
“While this creates greater opportunities for business, it also increases the risk of potential cyber fraud and cyber breaches,” she said. “We’re observing major drivers moving investment and wealth managers into the space of providing online and real-time access to their clients — providing them with the ability to communicate through multiple channels, not just traditional phone and email. We see there is a risk that these communication channels can be hacked, exploited, or even misused by counterparties that are not familiar with the technologies.”
Linnevers said the move to automation can help overcome some of these challenges, both by closing the tech talent gap and helping firms proactively respond to breaches in real time.
Henning Schwabe, Partner at Arendt, said rapid advancements in technology are outpacing the actions of regulators and lawmakers, making it crucial for asset managers to address cyber risks directly, at the level of the fund.
“This is part of the work we are doing with the ALFI Cybersecurity Working Group — we are taking it from a governance view from the board of the fund first,” he said. “We are setting up the right risk management tools and reporting lines from the top to make sure we have a proper, sound risk management plan in place that can address these weaknesses that are being identified.”
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the Nicsa panel, they do not necessarily reflect the views of Nicsa or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.
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