Why PE/VC Firms Need to Invest in Cybersecurity

If you’ve ever fallen victim to an online security breach, you know how damaging the experience can be. And, for PEs especially, it can be expensive. 

In 2021, the average cost of a data breach reached $4.24 million, and these costly attacks are only rising. In the past few years, financial firms have seen a 238%+ increase in cyberattacks, targeting sectors like private equity, which are notoriously responsible for handling private information. This risk has pushed the industry to evolve past the point of cybersecurity being a “nice to have.” It’s now a regulated requirement.

To help safeguard your firm against security threats and align to the new rules provided by the SEC, it’s critical to begin investing in cybersecurity as a core strategy. Read on as we share ways PEs can adapt and strategize to combat growing cyber threats.

New Rules and Regulations for PEs

With an intense focus on profit, the financial industry has always put cybersecurity on the back burner, notoriously relying on the honor system to assure stakeholders that proper policies and procedures are in place in case of a cyber attack. 

However, after the SEC introduced new cybersecurity rules earlier this year, cybersecurity policies  designed to protect investors and the market are a regulated essential for the industry. As a result, PEs must align to specific policies and procedures to enhance breach preparedness while also improving investor confidence in the firm’s ability to stand up against cybersecurity threats and attacks.

These new rules include: 

  • Investment advisers and funds must adopt and implement written cybersecurity policies and procedures for cybersecurity risks and incidents; 
  • Keep related record-keeping for advisers and funds; 
  • Provide confidential reporting to the SEC in the case of specific cybersecurity incidents, and disclose marketing materials and registration statements about particular incidents to advisors. 

Malware, Spyware, Phishing: Top Threats Targeting PE 

Before we dive into implementing the new regulations, it helps to understand exactly how cyber risks threaten PE/VCs. Because of the sensitivity of the information they handle, including financial and personal data, firms have become top targets for hackers due to the sensitivity of the information they handle. 

Threats and breaches commonly occur in a few ways:

  • Malware: Once they can hack into your internal platforms and database, hackers will hold your data for a cash ransom, which the firm usually has to pay to keep their data exposure from going public. This is not only a costly threat but also decreases investors’ trust in the firm’s ability to maintain cyber security. 
  • Spyware: Spyware is a growing concern in the PE space, as it secretly records actions like entering passwords, login information, financial transactions, and exposes private market and research data. Without strong modern antivirus software in place, any firm is at risk of a spyware attack, and may not even know if or when they’re attacked. 
  • Phishing: In terms of overall data and money lost amongst PEs, phishing scams come out on top. Hackers “phish” by sending fraudulent emails (usually impersonating a government or bank official) requesting private data, such as financial information, personally identifiable information, etc. When a firm member unknowingly replies, sensitive information is exposed to hackers. 

Strategize to Safeguard Your Firm 

PE/VCs handle a lot of very sensitive information—names, emails, phone numbers, social security numbers, investor information, etc.—that, if stolen, could result in a negative ROI, not to mention millions of dollars lost and compromised identities.  

To combat the threats targeting the industry and mitigate weaknesses and potential exposure to threats, firms are investing in a cyber strategy. To start, firms are considering cyber risks as real threats to their business (including portcos). These threats and risks should be considered in all decision-making across the firm, especially if your firm deals with transmitting sensitive information.

A strong cybersecurity strategy for private equity firms combines different software solutions to form a complete protection plan, including: 

  • Password management and access controls 
  • Backup and disaster recovery to ensure your team has a set course of action to mitigate network downtime and get your business back up and running as soon as possible 
  • NextGen Antivirus to alert of system breaches and potential viruses and malware 
  • Network Monitoring for 24/7 security and threat or breach alerts 

However, no software solution can be successful without properly training your team on Cybersecurity Awareness. The best strategy to protect against phishing and other cyber attacks is pairing the solutions above with a training program to ensure employees are always up-to-date and know what to look out for if/when a security breach is attempted. 

Arm Your Firm with Altvia 

Your firm operates on proprietary information and institutional knowledge, which means it’s at risk to lose big if any of that information is breached. Thankfully, when paired with a cyber security strategy, Altvia can help safeguard your firm against security threats. 

By combining industry-leading information security policies and best-in-class tools, Altvia slides in seamlessly with other software you have in place, centralizing and protecting your data and information. 

To learn how Altvia fits into your firm’s cybersecurity strategy, start a conversation with our team.

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