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HOW FINANCIAL SERVICES CAN ACHIEVE ZERO TRUST

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By Ian Jennings, Managing Director, BlueFort Security

 

Financial data is one of the most prized targets for cyber criminals.  This makes any organisation collecting, processing and storing financial data on any scale a target for attackers.  Even relatively simple attacks – as in the case of the distributed denial of service (DDoS) attack against the New Zealand stock exchange – can take operations down completely.  However, for large financial services firms the threat against this data is growing larger, more complex and increasingly sophisticated by the day.

The cyber threat landscape has changed dramatically over the course of the pandemic and many UK financial services firms have felt the squeeze.  A recent report from the Ponemon Institute commissioned by Keeper Security revealed the majority of organisations in the UK financial sector suffered cyber-attacks in 2020 – driven primarily by attackers targeting employees working remotely.  Security leaders in these organisations fear the worst – 41% are concerned remote workers are putting their organisation at risk of suffering a significant data breach.

 

Thinking strategically with Zero Trust

There’s no doubt the massive shift to remote work has created new vulnerabilities for criminals to exploit, but IT security teams do have a strategy available that will help counter these exploits: Zero Trust.

A Zero Trust strategy works by limiting privileges and access for users and devices until their identity and legitimacy can be verified first – even if they are already on the network.  Rather than assuming trust for anything that has successfully logged onto the network, a Zero Trust strategy verifies and re-verifies users and devices each time they attempt to access different parts of the network.

A well-implemented Zero Trust strategy offers a layer (or, in reality, multiple layers) of additional security against many types of attack.  Brian Kime, Senior Analyst at Forrester, recently pointed out the importance of looking at Zero Trust in response to the ransomware attack on the US Colonial Pipeline.  Discussing the fragility of most IT systems in the face of these attacks, Kime explains that – despite myths – a Zero Trust strategy is neither costly nor complex to deploy.

 

The net result of remote working

Security concerns around remote working in the UK financial sector are well-founded, given the speed at which nearly all organisations in the sector were required to deploy a remote workforce and the pressure IT teams were under to maintain operations.  Recent Trend Micro research revealed that remote workers often engage in more risky behaviour at home than when they’re at the office.  Combine this with a surge in COVID-19 phishing emails and a swathe of shared or unsecured personal devices and you have a perfect storm of risk.

The net result today for many UK financial organisations is a huge concern for malware-infected endpoint and IoT devices, insecure network access and compromised credentials leading to identity-based attacks.  Indeed, the 2020 Zero Trust Endpoint and IoT Security report from Pulse Secure – which explored how enterprises are advancing Zero Trust endpoint and IoT security capabilities within their individual organisation – found that 72% of organisations experienced an increase to significant increase in endpoint and IoT security due to workforce mobility and remote workplace flexibility.

 

It’s all about the data

A Zero Trust approach allows an organisation to defend itself against identity-based attacks.  In its simplest form, it acts as a layered security approach that assumes an attacker will breach the corporate network.  Instead of prevention, a Zero Trust architecture acts as a guardian against lateral movement once an attacker is inside the corporate network.  When deploying a visibility and access control strategy like Zero Trust, financial services organisations should consider three key building blocks:

  1. Validation – of users and their devices’ security posture
  2. Control – of access through granular policy enforcement
  3. Protecting and encrypting data transactions

In the new mobile world of work – with many employees working remotely – it is crucial that IT security teams focus on the data.  Data moves with endpoints and this makes them attractive targets for cyberattacks.  Security policy, therefore, must move with users and data and should not be tied to a particular location.  Just as endpoint security products secure and collect data on the activity that occurs on endpoints, network security products do the same for networks.  To effectively combat advanced threats, both need to work together.  An integrated approach that combines endpoint and network security is the only way to achieve end-to-end protection across your entire security architecture.

 

And finally: get your users on board

User experience can often fall far down the priority list when it comes to IT security, but it should be seen as a crucial factor in long-term security posture.  A Zero Trust strategy should incorporate a positive user experience while it enforces policy compliance across employees, guests and third-party users – regardless of location, device type, or device ownership.  Users enjoy greater productivity and the freedom to work anywhere without sacrificing access to authorised network resources and applications.

A Zero Trust strategy may seem like an unachievable goal, but it isn’t.  Fundamentally, it’s about achieving a state of continuous verification and authentication throughout the network, with centralised policy enforcement and a seamless experience for users.  This ensures any device – whether that’s a company-issued laptop, an employee’s personal tablet or a stray IoT device – can only connect to authorised applications on the corporate network in a compliant manner.  In the case of attack, Zero Trust can help contain the breach, limit the damage and significantly speed up an organisation’s path to recovery.

 

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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