Family Office Cybersecurity: Prime Targets for Hackers
Family offices are increasingly under attack from cybercriminals, and many lack the necessary staff and technology to adequately prepare for these threats, according to a recent survey. The vulnerability of family offices is underscored by alarming statistics: 79% of North American family offices believe the likelihood of a cyberattack has increased dramatically in recent years, according to a survey by global law firm Dentons.
Rising Incidence of Cyberattacks
The survey revealed that a quarter of family offices experienced a cyberattack in 2023, a significant rise from 17% in 2020. Additionally, half of the respondents reported knowing another family office that had been targeted by cybercriminals. This trend highlights the growing appeal of family offices to hackers due to their substantial wealth and relatively small, often under-resourced staffs.
The High Stakes for Family Offices
Edward Marshall, Global Head of Family Office and High Net Worth at Dentons, compares this phenomenon to the “Willie Sutton effect,” named after the notorious bank robber who targeted banks because “that’s where the money is.” Family offices often have minimal staff with access to highly sensitive financial information and private company details. Marshall points out that these offices prioritize efficiency and speed over risk management, leaving them ill-prepared for potential cyberattacks.
Inadequate Cyber Defenses
Despite the heightened awareness of cyber threats, many family offices have not significantly improved their defenses. The Dentons survey found that less than a third of family offices have well-developed cyber risk management processes. Only 29% of respondents believe their staff and cyber-training programs are sufficient, and less than half have upgraded training programs or regularly update cyber policies.
Bridging the Cybersecurity Gap
The gap between awareness of cybersecurity risks and the implementation of effective measures is concerning. A report from EY U.S. and the Wharton Global Family Alliance recommends that family offices address cybersecurity by focusing on three main components of tech risk: hardware, software, and applications.
Practical Recommendations for Family Offices
- Secure Communication Channels: Instead of using emails for financial or personal information, family offices should utilize secure websites or intranet sites.
- Password Management: Implementing password vaults can significantly enhance security.
- Vendor Vetting: Thoroughly vetting tech vendors for security measures is crucial to mitigate risks from third-party services.
Proactive Measures for Family Offices
Marshall emphasizes the importance of a proactive stance on cybersecurity. This involves comprehensive assessments that extend beyond merely addressing cyberattacks to encompass overall security strategies. Family offices must adopt robust cybersecurity frameworks to protect their substantial assets and sensitive information from increasingly sophisticated cyber threats.
Conclusion
The increasing frequency of cyberattacks on family offices necessitates a shift towards more robust cybersecurity measures. By adopting comprehensive risk management processes, enhancing staff training, and leveraging secure technologies, family offices can better safeguard their assets and confidential information against cyber threats.
For family offices, prioritizing cybersecurity is not just a defensive strategy but an essential aspect of modern financial management. As the threat landscape continues to evolve, staying ahead of cybercriminals requires vigilance, investment in technology, and a commitment to ongoing security improvements.
