Private equity (PE) firms are becoming more dependent on outsourcing as they adopt novel technologies for operations. Though this is a welcoming task, it is a daunting task as well. The number of threats they expose themselves is bound to increase at an exponential rate.

Private equity firms are facing cybersecurity risk in major concerned areas like data breach of confidential information (clients and business), deal breakdown or negative impact due to loss of data, and consequences of a cyber breach at a portfolio company.

Let us understand the top cybersecurity risks faced by the private equity industry here.

Key cyber threats at the private equity industry

Cyber threats can bring the entire system to a standstill. The attacks are more pervasive and sophisticated that PE firms may face external and internal threats as well. The security can get compromised by negligent or ignorant employees in-house. Moreover, the nature of threats is changing constantly. All these add up to the risk. However, it can be mitigated with detailed attention.

Here is a brief note on cyber risks faced by private equity industry

The human factor is the weakest link

The human factor plays an important role in maintaining cybersecurity. The malicious insiders may take advantage of privilege abuse, mishandle data, knowledge abuse, email abuse, net misuse, illicit content, unapproved use of hardware or software, and many more.

Ignorant and negligent act leads to –

•introduction of spyware, malware, or viruses
•identity theft online
•overloading of servers leading to DDoS attacks
•unauthorized access to computers, services, or network
•loss of money electronically

To prevent this, all the employees other than the C-suite level must also get awareness training.

Failure to cover basic cybersecurity measures

Hackers are poised to use common exploits and vulnerabilities due to a lack of fundamental measures. Cybercriminals use common vulnerabilities to hack into an organization and its systems. Many PE firms rely on antivirus as a single security layer. They fail to encrypt data. Understanding cyber risks are critical while solving this problem. It is easy to solve the issue. People are not aware of the seriousness of layered security which is nothing but an open invitation for attackers.

Professionals involved in private equity jobs often fail to understand their vulnerability, the value of assets, and the profile of potential hackers. Though they are off the subject matter, it is critical to bring awareness to every employee regarding basic cybersecurity measures.

Lack of cybersecurity policy

Security standards are a must for any company to thrive well. High-profile security breaches are increasing and external attacks are becoming more frequent. They say there are only two types of companies. The companies who know they are hacked and the other one is who doesn’t know that they are hacked yet. To put it in simple words, every company is prone to attack or already got attacked.

It is highly crucial to maintain cybersecurity policy and abide by rules and regulations. PE firms must be able to identify risks, establish governance, protect company network and data, detect unauthorized activity and handle risks. They must develop policies and procedures as per the latest norms.

Going forward, to decrease in M&As, financial information loss, and dilution of portfolio value, let us see how to implement cybersecurity strategy in PE firms.

•Implement a dual strategy to safeguard investors assets and your firm assets
•Evaluate basic risks based on tried and tested methodologies and best practices
•Implement social media policies
•Conduct regular evaluations and updates
•Invest time to train employees
•Protect portfolio company targets
•Embed deep level of security in M&As

To summarize, protect consumer data, trade secrets, and critical national assets. Be aware of your firm and portfolio companies. Make your efforts worth it by following simple, easy, yet stringent methods to be cyber safe.