When it comes to cybersecurity and compliance, the stakes have never been higher for financial services firms. 4Pines CTO, Bob Balfe, says centralized identity management is the price of entry for firms that preside over sensitive data.
With hackers targeting gas pipelines, meat processors, private companies and government agencies in recent days, the risks of spotty cybersecurity have never been higher. No one successful is safe because, where there is money to be made, cybercriminals are looking for a way in. That’s why fund administrators, the gatekeepers for much of the world’s financial system, must be on guard.Â
Fund administrators must be airtight on compliance, know your customer and anti-money laundering regulations. They shouldn’t even trust themselves. That’s why using a centralized identity management system should now be the price of admission for financial or professional services companies that preside over sensitive data.
The Need for Centralized Identity Management
These systems are becoming crucial, coincidentally, at the same time that fund administrator, auditors, and financial services firms are facing growing demand for transparency. Clients want instant access to data, streamlined communication platforms, easy approval and sign-off processes and greater accountability around fraud and compliance systems. Sound security, however, can result in the opposite occurring. The challenge today is rolling out new systems that keep out bad actors without interrupting operations or creating barriers to collaboration.
In financial services, data breaches are not an abstract threat. In 2019, the financial services industry accounted for 62% of exposed data, according to a Bitglass report based on data from the identity theft resource center (ITRC) and the Ponemon Institute. And across industries, financial services trailed only health care in the cost per breached record ($210 per record for financial services, compared to $429 for health care.)Â Â
Many financial services firms today rely on various platforms for their daily workflows, such as messaging apps for internal conversations, emails for external communications, shared spreadsheets for exchanging financial data and other tools for security, compliance, and market research and insights. Ensuring security for each of these separate systems can be difficult to impossible. One loose end can leave a backdoor open to hackers, compromising the whole system.
That’s why fund administrators need to centralize identity management. An integrated system lets clients and their partners perform all of their necessary functions in a secure environment without having to juggle passwords or face constant security hurdles that stifle productivity. Creating a single, airtight portal for entry is an essential step in ensuring your firm will not be the next victim of a data breach.
See More: Open Banking in LatAm: Navigating the Fine Line Between Data Privacy and Transparency
What Does Centralized Security Look Like?
Centralized identity management systems require things like dual authentication for every member of a financial services team and their clients, forcing every actor involved in a transaction to prove their identity before accessing private info and keeping lines of communication open to cut down on opportunities for fraud.Â
Through targeted integration of advanced technology, fund administrators can also automate previously time-consuming processes required by know-your-customer and anti-money laundering regulations. Financial firms should not be paying people to input data and fill out forms when machine-powered solutions can do the work faster and just as, if not more, accurately.Â
Once these processes are complete, centralized security can be combined with customizable user interfaces to give your employees and clients a holistic view of investment performance, risk management and market insight all through the same easy-to-use role-based portal.
After a year when remote work was both accelerated and normalized, these systems helped firms to recreate a digital office that functions more like traditional in-person workplaces. You need fool-proof security at the door, but once someone is inside, you know they can be trusted with the data and tools required to achieve optimal outcomes.
How To Achieve Centralized Security?
Fund administrators don’t need to start from scratch in building these systems or managing the change from the status quo. Third-party security tools, like Microsoft’s cybersecurity suite, ensure that trusted users are in a manageable active directory and that anyone accessing your information has been vetted according to internal guidelines and relevant regulations. This centralized directory is also used to assign application roles and API access at all levels, giving the administrators a holistic view of access for users, APIs, and programs.
Financial executives and investors reading the latest headlines about data breaches can remain confident that their systems and those of their fund administrator and professional services partners are covered by the best security apps of major tech companies capable of staying one step ahead of emerging security threats.
See More: Open Banking Isn’t Without Its Cybersecurity Risks. Here’s How to Overcome Them
Closing Thoughts
These all-encompassing cybersecurity tools are key drivers of efficiency and transparency, which in turn are quickly becoming important differentiators in financial services. As private capital overhauls data systems and integrates advanced technology like AI into their operations, back-end security is crucial to achieving the desired outcomes from these tech investments, including giving more users access to data insights, reducing the costs associated with compliance, audits and system and organization controls reporting.Â
As we emerge from a once-in-a-generation public health crisis, financial leaders will need to navigate an unprecedented economic landscape with many unknowns, from the risk of long-term inflation to continued unemployment and market volatility. Cybersecurity should be one thing that financial firms can count on.
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