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HOW FINANCIAL ORGANIZATIONS CAN PROTECT THEIR DATA

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Yuval Wollman, President, CyberProof and Chief Cyber Officer, UST

 

Top executives from Wall Street’s largest banks pinpointed cybersecurity as the greatest threat to America’s financial system, at a Congressional hearing that took place in May.

The concern of financial industry leaders with cyber-attacks is neither surprising, nor new. The attraction of cybercriminals to banks and other financial institutions makes sense, given the fact that the financial sector functions as gatekeepers – not just of financial assets, but also of valuable Personally identifiable information (PII).

Threat actors are attracted to attack financial institutions to earn a profit through increasingly sophisticated attacks that range from ransomware attacks to identity theft. But while the threat continues to grow, there is much that can be done to mitigate the risks.

 

The Downsides of Digital Banking

The number of attacks on financial institutions increased sharply in the last two years due to the upheavals wrought by COVID-19, which prompted a dramatic rise in the number of online transactions.

With so much of today’s financial transactions done on both web and mobile devices, threat actors have more opportunities than ever before. Take, for example, the growing importance of Man in the Middle (MITM) Attacks, which impersonate another party online and give criminals access to personal data, passwords, and banking details.

With the widespread adoption of digital banking, consumers have become increasingly worried about cyber-attack. As a result, there’s growing demand to create better consumer protection laws that respond to the rapidly evolving technology. The U.S. Federal Trade Commission (FTC), for example, recently strengthened security safeguards for consumer financial information.

 

It’s Not “Just” About the Money

Financial organizations are at risk not just from threat actors looking for profit, but also from nation-states and hacktivists acting out of idealistic motives or as a means of achieving specific political ends.

The most famous examples of this type of attack include Russia’s 2016 attack on Ukraine’s electric grid and North Korea’s 2017 attack on Britain’s National Health Service.

Because of the extent of the damage that this type of attack could cause, NATO established cyberspace as the “fifth domain of warfare” in 2016. It developed a definition of when foreign factions are banned from attacking financial institutions, due to the fear that this type of attack could directly lead to a country’s destabilization.

 

Recognizing Risk Factors

The digital transformation of financial services helps banks and other financial institutions provide more a more convenient customer experience.

And while significant customer demand has led many banks to implement changes such as the transition from legacy to cloud-based solutions, these shifts also have the potential to create additional security risks.

For example, if we’re talking specifically about cloud migration, there’s need for additional security layers to protect organizations working with public cloud providers from the range of attacks targeting the financial sector: ransomware, account takeover, data theft and manipulation, phishing attacks, identity theft, and more.

Another example is the extensive use of third-party vendors, which has increased the risk of attack for organizations in the financial sector. Because third-party vendors enlarge the attack surface, they create more entry points to the system and make it harder to protect customer data.

 

Accelerating Detection & Response

By adopting an agile approach that supports continuous improvement, financial organizations can facilitate proactive identification of evolving threats and vulnerabilities in the wild. More specifically, by placing an emphasis on use case optimization – which starts by mapping out an organization’s threat detection gaps to a framework such as MITRE ATT&CK – enterprises can prioritize threats and invest their time and resources in mitigating risk more effectively.

For organizations transitioning to the cloud, what’s key is managing the migration process in a way that provides optimal visibility in the cloud and supports ongoing optimization at the enterprise level. Digital playbooks are a crucial tool in providing improved detection and response, creating automated or guided responses that allow faster, more effective, collaborative action.

The development and regular review of incident response plans similarly allows for efficient response in emergency situations and helps reduce the business impact of cyber-attacks.

 

Targeted Threat Intelligence

Threat intelligence that’s tailored to the financial services sector is another key component of timely detection and response. By working with expert Cyber Threat Intelligence (CTI) services, organizations can obtain up-to-date information about industry-specific threats in real time – information that is a highly valuable tool in strengthening the defense of an enterprise.

 

Cyber Hygiene

Employees make mistakes; after all, it’s only human. But these errors can lead to massive data breaches. For example, when someone clicks on a phishing email or leaves passwords for a company computer on a slip of paper that’s easily seen by the wrong person, the damage can be astronomical.

Providing regular cybersecurity training programs for employees can help minimize the risk of an accidental or careless action leading to cyber-attack. To be effective, training programs should not only explain how to spot cybersecurity risks like phishing emails but should also discuss how and where it’s safe to access company information.

Aside from employee training, there are fundamental cybersecurity-related decisions that should be implemented at the enterprise level such as Zero Trust, DevSecOps, and multi-factor authentication (MFA). From a policy perspective, for example, it’s crucial to enforce MFA for all applications. Moreover, technology-related vulnerabilities can be minimized through frequent patching and updates for systems. Audits, as well as vulnerability and penetration tests, must be conducted regularly.

 

For the Financial Sector, “Best Practices” are Key

With the growth in number and complexity of cybersecurity attacks on financial organizations and the increased risk of nation-state attacks, proactively approaching the question of cybersecurity and implementing “best practices” makes the difference in reducing the degree of risk to an enterprise.

By modernizing the SOC with a carefully navigated migration to the cloud, adopting continuous improvement of use cases and the development of digital playbooks that improve detection and response – as well as by leveraging targeted threat intelligence and maintaining strong cyber hygiene – enterprises can put themselves in a stronger position to minimize the potential business impact of a cyber-attack on their organizations.

 

Finance

Why financial services is stepping into a new era

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by James Mingard, Head of Retail & Finance at Maintel

 

When comparing industries, financial services has arguably fallen behind when it comes to digital transformation. The sector has found it especially challenging to move from more traditional, legacy ways of working. But, with challenger banks and changing customer expectations, the tables have turned. According to a  recent research report from Maintel, in partnership with RingCentral, the financial services sector is leading the way when it comes to implementing digitalisation plans. In fact, 35% of those surveyed within the sector claim to have fully implemented their digitisation plans, compared to just 26% in other industries.

 

Evolving Technology

As such, banking technology is innovating at a significant rate, with everything from start-ups offering online-only credit cards to TSB opening a 100-seat tech centre in Scotland. There is little doubt that the sector understands the need to be digital-first, but there is room for improvement. Over half of respondents said they have seen an increased demand for digital communication from customers because of the pandemic, but the channels on offer fall behind other industries.

Over half (55%) of other industries communicate with customers through Twitter, compared to just 30% in the financial services sector. We might not want to discuss our mortgage over Instagram or to tweet about how much money is in an ISA. However, there is a real opportunity for the financial sector to add to its offering and grow its digital communication channels. By giving customers more options, it will help improve customer experience and let the end-user reap the benefits of digital transformation strategies. Balancing the expectation for digital-first interactions while ensuring a high-quality customer experience is central to creating an efficient, yet personal service.

 

Collaboration is the future

The contact centre of the future should represent an integrated approach to unified communications. It should bring business experts and agents together, across every channel to deliver real-time customer experiences in a cloud-based, collaborative engagement model. For financial services, this once seemed a pipe dream but advancements in digital transformation mean that the sector can in fact set the standard for other industries.

From a productivity point of view, team collaboration can also be enhanced using innovative communication technology. This helps to improve an employee’s workplace experience by providing instant access to essential information and allows them to work effectively from any location. Flexibility has not always been associated with the financial sector, but by giving employees better technology and more autonomy, naturally, this has a knock-on impact on the experience that customers receive and helps to foster long term loyalty.

 

Customer comes first

Banks used to be built on life-long custom. Many people would be with the same bank from their first current account through to the day they passed away but the volume of competition, variety of offers and new customer deals mean that today’s consumers are fickler than ever.  To really stand out, financial services providers need to make sure that everything from communication strategies through to software has the customer at its heart. And technology is key.

Indeed, customer experience, customer  and technology insights were the top three benefits of digitisation within the sector, according to Maintel and RingCentral’s 2021 report, It’s therefore clear that a customer and user experienced focused approach is key to success in the financial sector.

 

Click here to read the research report in full – How to translate unified communications and digitalisation into better customer experience.  For further information find out more :- https://www.maintel.co.uk/industries/financial-services/driving-financial-services-digital-transformation/

 

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FINANCIAL MARKETS IN 2022: INFLATION, ENERGY PRICES, AND THE CONTRASTING PERFORMANCE OF STOCKS

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Bob Jenkins, Head of Research, Refinitiv Lipper

 

Anyone hoping for a reprieve from the chaos and uncertainty of the last couple of years is likely to be disappointed. The pandemic will continue to have an impact on global economies, both directly (such as ongoing lockdowns and restrictions to combat the disease) and the exhaust effects we’ve seen in areas such as the production of goods, supply chain challenges, labour shortages and rising energy prices.

At the same time, the digital disruption of the financial world continues apace, with assets once overhyped becoming increasingly mainstream.

To make specific predictions in such an environment might seem like a fool’s errand, yet it is possible to discern some themes that will shape the course of financial markets in the coming year.

 

  1. Global inflation gets stubborn: Inflation is not transitory, and we are seeing a foundation for higher prices being put in place thanks to the supply chain and labour issues previously mentioned. In major developed markets, I think we’ll see stubborn inflation regardless of whether Covid remains a pandemic or begins to enter an endemic phase. The situation is slightly more positive in the US; while inflation will remain at a 3.5-4.5% range, a reduction in supply chain bottlenecks, increasing labour force and improved unemployment rates will serve to reduce the impact of primary inflation forces. We should bear in mind that households are estimated to have around $2 trillion in savings, which will maintain consumption levels and keep up the pressure on labour and supply chains.
  2. Rates will rise: Rates are likely to rise, with discussions in several major economies indicating a tapered end to the period of low rates we’ve seen since the 2008 financial crisis. This will probably be achieved in fits and starts as central banks navigate virus outbreaks and any resulting economic shocks. For instance, both the Fed and the Bank of England have indicated there will be hikes, but it is likely that they will rely on tapering at first to slow stimulus while also trying to navigate sentiment swings and volatility arising from waves of infections and/or new variants.
  3. China to lead economic growth, but not by much: China’s growth is likely to be around the 4-5% mark, with the US just slightly behind at 3.5-4%, off its 6% pace from the first part of 2021. The European Union and United Kingdom will likely trail the US, even if they have been exhibiting similar economic issues, while emerging markets could be hit by a combination of the Fed tightening up and challenges dealing with Omicron and other COVID waves.
  4. Higher energy prices are here to stay: Multiple forces will provide support to higher energy prices: supply chain issues, political posturing, demand for heating/cooling due to climate change, but Covid will occasionally step in to disrupt and counteract these forces. Even carbon neutral efforts could cause overall energy prices to rise in the near term as energy producers shift to renewables, with many of these alternative sources remaining expensive. Oil will stay in the $70-$80 range, with the occasional dip towards $60 as intermittent Covid concerns influence energy consumption in the travel sector.
  5. Underperforming stocks with a positive finish: In general, slower growth and lower rates help Growth and Tech stocks while faster growth and higher rates benefit Value and Cyclicals and I believe the economy will tend to lean towards the latter scenario. That said, growth and value leadership will change hands throughout the course of the year as the economy reacts to Covid waves and switches between lockdown and reopening. I suspect Value and Cyclicals will outperform Growth and Tech at the margin, but the dominate capitalization size of the latter two will pull down overall stock market returns. Of course, as with consumers, there is a lot of money being held back at the moment. Businesses have significant cash reserves and self-directed traders continue to shovel money into markets, which, when combined, can help buoy stocks.
  6. Flattening the bond yield curve: I think we will see some retrenchment as a result of rising rate programs by central banks that will largely result in negative to flat returns across core fixed income. Any selling in longer term bonds in reaction to either economic or central bank activity will be mostly offset by buying due to the global desire for yield, thus keeping a lid on longer term rates. Rising short term rates in this environment will serve to flatten the yield curve. High yield bonds could provide for pockets of opportunity as they are potentially tied to cyclical areas of the economy that could show leadership.
  7. The contrasting futures of ESG and digital assets: In the coming year I think we’ll see digital and tokenized assets become almost as popular as Environmental, Social and Governance (ESG). However, whereas ESG is a permanent shift that will eventually encompass the evaluation of all mutual funds, digital currencies still look a little more niche. We could well see them proliferate over the next few years, potentially even becoming a new quasi-asset class, but they will remain a satellite allocation in risk tolerant portfolio strategies. They are unlikely to achieve the status of being included in mainstream portfolios such as defined contribution retirement plans where assets can flow in large, consistent amounts – unlike ESGs, which could well reach that point in the coming years.
  8. A more defined ESG: It is looking increasingly likely that ESG funds will begin to splinter into more thematic offerings as investors eschew the combined “ESG” mandates in favour of more targeted strategies that enable them to better assess stocks aligned with fund objectives. This will also help avoid those securities jumping on the ESG bandwagon.
  9. The continued rise of the Big Five: Of course, in an era of unpredictability, there are always going to be trends or themes that run counter to accepted wisdom. Despite the aforementioned attempts of central banks to raise rates, the Big Five stocks (Microsoft, Alphabet, Apple, Amazon and Nvidia) will continue to show leaderships. While technically falling into the camp of richly valued Growth, these stocks have begun to also acquire a status as a safe haven, with generally strong earnings demonstrating a consistency and dependability that attracts investors. They also populate immense amounts of passive and retirement plan assets under management, equating to steady flows into them in almost any economic environment.

 

All this plays out against a backdrop of our changing stance on COVID. While there are some commonalities in how different regions tackle the pandemic, the continued uneven nature of our global responses makes it hard to determine what state we will be in this time next year. If most major economies can move to an endemic setting, then we should have the tools in place to make ‘living with Covid’ a reality. However, the continued emergence of other variants will cause volatility, and with it a predictable jostling of market leadership. Perhaps the only predictions anyone can truly make is that life will continue to be unpredictable for some time to come.

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