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PREPARING YOUR HEDGE FUND FOR THE MODERN CYBERCRIMINAL

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By: Simon Eyre, Head of Europe, Drawbridge

 

The familiar adage that “every organization is a target” when it comes to cyber-attacks, solidifies its place as an undeniable truth for companies in all industries each year. Spring has barely begun and we have already seen what could be one of the biggest cyberattacks of 2021. When thousands of companies were compromised due to the exploitation of flaws in the Microsoft Exchange Server email software, organisations across the globe were once again faced with the reality that the modern cybercriminal will use any opportunity to gain leverage in the cyberspace and get a monetary advantage.

Today’s criminal is capable, skilled, and always following the money. This is what makes the financial industry a tempting target, with alternative investment firms being increasingly being targeted by criminals. Very recently, Sequoia Capital, one of the largest venture capital firms in the world, was successfully phished with sensitive data being exposed to criminal eyes.

So, what can hedge funds do to prepare the organization for an impending cyberattack?

 

One size fits all?

It is tempting to bolt-on the latest technology on the market, and trust that the product will do ‘what it says on the box’. When constructing a robust cybersecurity program, to avoid investing in cybersecurity plans that are seemingly “one size fits all”, hedge funds should firstly focus on evaluating the cybersecurity landscape and understanding the most common threats and potential attack vectors. The firm’s leadership and cybersecurity team should identify what factors would make your business a target and why would you be at risk, as well as consider the types of cyberattacks your peers have experienced. Ask questions such as: “What kind of breaches and attacks are happening in the industry to firms of our size and strategy?”, “How are other firms mitigating these risks and how can our fund do the same?” and “Where are the cracks in the technical armor?”

During this process, you should consider what data is most important to your business. What are the crown jewels of the hedge fund? Consider where this data is stored, who has access to it, how it is transmitted and whether vendors process it. Never underestimate what might be of value to a cybercriminal. Your most important data can include corporate data, communication records, or personal data of staff and investors.

Prioritize protecting your data and protecting against the most likely attacks that would disrupt the business.

 

Plenty of phish in the sea

Phishing remains a weapon of choice for the modern cybercriminal. In 2020, we saw as number of attacks occur via social engineering, voice/email phishing and impersonation. One notable example is the unfortunate set of events that set in motion the eventual closure of Levitas, an Australian hedge fund. After sending a fake Zoom invite and it being accepted, hackers planted malware and gained control over an executive’s email, leading to the approval of $8.7M in fraudulent invoices. Shortly after, the firm’s largest investor pulled their planned investment, resulting in the fund being scheduled to wind down.

What can we learn from this? Any employee in the hedge fund could fall victim to a phishing attack, as these emails, calls and invites are carefully crafted and virtually indistinguishable from the real deal. An important mitigation strategy is to invest in high quality staff awareness training that goes beyond ticking boxes on a generic on-demand course and tests. Hedge funds should establish a training program that is relevant to the business, the work environment, and its risks, as well as the systems in use. Standard template training is insufficient in preparing staff for the delicately created and convincing attacks of cybercriminals.

 

A balanced blend of staff training and technology

Most cybersecurity experts would agree that defense in depth is critical. This means that the hedge fund’s technology and staff should work in harmony to achieve the highest degree of protection for the firm. Many cyberattacks, especially phishing, have time on their side. Once an employee has been convinced to click on a link, criminals will lurk in the background and look for vulnerabilities within the business. To address this issue, in addition to employee training, hedge funds should invest in a vulnerability management solution that helps discover weaknesses within the system. Hedge funds should continually perform vulnerability management with recurring penetration testing of their environment to ensure the safety of their data and uninterrupted service.

 

The importance of vendor management

Hedge funds today work with a network of independent partners or vendors that support the running of their operations. From law firms, to auditors, brokers, marketers, researchers and administrators, the hedge fund’s network expands into a complex spider’s web, increasing the likelihood of a successful cyberattack with each new silk thread. Why? Criminals will not always go for the bullseye, but rather compromise a target that might have weaker defenses and use their network as a steppingstone to the hedge fund’s valuable data. This is one of the reasons why regulators and hedge fund investors are hyper focused on vendor due diligence. To minimize risk, hedge fund managers should hold vendors to the same cybersecurity standards as the business itself. Remember, your firm’s network is only as secure as the weakest vendor with access to your data. Extensive due diligence of third parties should not be optional – it is required.

Criminals continue to be attracted to valuable data, and hedge funds can expect to be increasingly targeted due to the nature of their business and large transactions being processed every day. To avoid financial and reputational damage due to a cyber-attack, as well as ensure regulatory compliance while navigating a complex regulatory environment, hedge funds must invest in and develop a robust cybersecurity program that is tailored to the alternative investment industry. By focusing on the most important data, most likely attacks and equally investing in people and technology, hedge fund managers can protect their business, while building a reputation as a reliable partner in the alternative investment industry.

 

Finance

THREE STEPS TO ENSURE RECOVERY OF COVID LOANS GOES SMOOTHLY

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In the wake of the pandemic, the government acted quickly to provide financial Covid support packages to help struggling businesses. With the economy now recovering, Mike Hampson, CEO at Bishopsgate Financial explores the range of options available for banks to ensure that those loans are repaid.

 

Since the start of the pandemic, businesses have raised over £75bn[1] from banks and financial markets, through interest-free emergency support schemes. But the harsh reality is that not all loans will be honoured as the economy recuperates.

As a result, banking professionals with client relationship management experience and skills in supporting clients to repay loans in a challenging business environment, will be in high demand.

 

Mike Hampson

Setting up training capabilities for client support post-pandemic

Commercial bankers estimate 60% of new coronavirus scheme loans[4] will default or suffer other repayment issues that will drive previously unseen levels of non-performing loans. It’s a tough balancing act and one that demands careful management of the lending transaction lifecycle, from origination through to collection, recovery, and handling bad debts. Banks no doubt already have frameworks in place to manage these elements, but it’s highly important to make customer interactions as easy as possible and ensure their genuine concern for their customers is clear.

Subsequently, hundreds of workers at major banks including HSBC, NatWest and Metro Bank[5] are understood to be receiving training in how to deal with vulnerable customers and “demonstrate empathy” as the first wave of repayments for coronavirus loans fall due. Staff ‘sensitivity[6] training builds on client-support and workout capabilities, such as improving sensitivity to early-warning systems, developing short-term forbearance solutions and loan modifications, and providing guidance on alternative products.

This approach may further avoid the additional pressure on the UK’s mental health crisis as financial institutions prepare to call in loans issued during the pandemic.

HSBC, which now has 400 staff in its debt collection team,[7] said the aim was to ensure staff had a “consistent understanding of vulnerability” and are “aware of the factors that could make an individual vulnerable” when having repayment conversations with customers.

An executive at another bank said its expanded debt collection team was being trained in “empathy, vulnerability and listening skills”. The individual told The Telegraph: “Ultimately, we don’t want to damage the economy by being overly aggressive.”

A peculiarity of a crisis situation is that customers don’t always know what they will need until that need is pressing. Finding that their bank is prepared to help in unexpected ways will go a long way toward reassuring them.

[2] https://www.law360.com/articles/1355897/

[3] https://www.bishopsgate-financial.com/insights/the-change-perspective/the-change-perspective-2021

[4] https://www.grantthornton.co.uk/insights/how-to-manage-upcoming-non-performing-loans/

[5] https://industryslice.com/NewsLetter/8_33

[6] https://www.telegraph.co.uk/global-health/climate-and-people/covid-19-has-amplified-parallel-pandemic-poor-mental-health/

[7] https://www.msn.com/en-gb/money/other/bank-staff-get-sensitivity-training-before-calling-in-covid-debts/ar-BB1fNMte

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FOUR STEPS TO INTEGRATING INTELLIGENT AUTOMATION IN THE FINANCE DEPARTMENT

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Marieke Saeij, CEO of Visma | Onguard

 

It’s clear that Intelligent Automation (IA) is still very much an emerging technology, with one indication being that is has only been mentioned a handful of times on Twitter since the beginning of 2021. Results from our latest annual FinTech Barometer reveal a mixed picture in terms of awareness, with half of finance professionals having never heard the term before. Whilst this is unsurprising for a technology concept very much in the ‘early adopters’ stage, organisations can stand to gain real benefits from embracing Intelligent Automation now, particular within the finance department. With this in mind, we explore some of these benefits and share a step-by-step best practice to implementing it into business operations.

 

Intelligent Automation ensures a predictable order-to-cash process

Such is the speed of introduction of new technologies that it’s a challenge for businesses to keep pace. As the newest innovation in finance, Intelligent Automation is one that organisations can’t afford to let pass by. It truly takes financial process automation to the next level. In addition to helping maintain a high-quality customer service, it also complements the existing skillset of finance professionals in the industry.

Marieke Saeij

While Robotic Process Automation (RPA) and Big Data are key innovations for the sector, IA can be likened to an additional layer that enhances existing technologies. By combining applications, this layer is capable of independently assessing situations and determining the appropriate process sequence. It can, for example, fully determine the risk of a specific customer, and can also predict at an early stage which invoices will be paid late, or even not at all, ensuring that finance professionals can then plan accordingly. The result is a reliable and predictable order-to-cash process.

 

The four steps to an IA-proof organisation

While the benefits of IA are numerous, implementing the technology can prove complex, although some are already treading the IA path without knowing it. In this instance it’s crucial to become aware and begin the purposeful process to full integration. Below are the four key steps to becoming fully IA-proof.

  1. Exploring the potential: Brainstorm where automation can be applied

Step one is to examine the extent to which automation can help your organisation. Blue sky thinking is the key here. What is the ideal relationship with the customer? What does the ideal order-to-cash process look like? In this phase, involving multiple departments from within the organisation is key, from management to operations. The finance professionals who have the most contact with customers are likely to have the strongest knowledge of which processes they would like to see automated. With no limits to ideas, it’s best to explore all the opportunities in the entire order-to-cash process and describe broadly the potential value to the organisation.

 

  1. Decipher which data and technology is needed

The second step is to map out which data and technology is required. Working with a specialist, either external or from the internal IT department, is beneficial at this stage to see where the opportunities lie. In many cases, off-the-shelf solutions are already readily available to help make the difference, so it pays to do the research and gain advice where possible.

 

  1. Firm up the strategy

With the plan mapped out, it’s time to fit the pieces of the puzzle together. Which technology and accompanying software is proving most valuable? It’s vital at this stage to analyse the results the organisation is achieving from deploying the right technology and software. It’s also important to outline any limitations and emphasising the potential risk of failure. This is the business case and the basis for the elevator pitch that will be presented to internal stakeholders.

 

  1. Draw up the roadmap and start benefitting from agility

The fourth and final step is prioritisation. The roadmap will describe step-by-step how to move from the undesired current situation to the desired end goal. In the first step, choosing a subproject that is relatively easy to achieve will help gain support from other departments within the business, and provide invaluable experience that can be applied to the more complex components that follow later. This agile approach facilitates a learn-by-doing mindset and allows the following steps to be tackled in a smarter and simpler way.

 

Effective preparation is half the battle

Exploring the potential of automation, mapping the required data and technology, establishing the strategy and laying out the roadmap are the four crucial steps to ensure the foundation for Intelligent Automation. Effective preparation and estimating which technology and accompanying software is needed will help to create a streamlined and error-free order-to-cash process. To ultimately save time and costs, empower finance professionals and maintain customer loyalty, the time for Intelligent Automation is now.

 

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