Key Takeaways:
Cyberattacks on family offices have surged, with 79% seeing increased risk.
Less than a third of family offices have well-developed cyber defenses.
Experts urge proactive measures, including better staff training and technology upgrades.
What Happened?
Family offices, managing vast sums for wealthy families, have become prime targets for cybercriminals. A recent Dentons survey revealed that 79% of North American family offices believe the likelihood of cyberattacks has surged in recent years. Shockingly, a quarter of these offices reported cyberattacks in 2023, up from 17% in 2020. Despite the rising threats, only 29% of family offices say their cyber risk management is well-developed.
Why It Matters?
Family offices, with their significant wealth and minimal staffing, present attractive targets for hackers. Edward Marshall of Dentons pointed out the “Willie Sutton effect,” where criminals target these offices simply “because that’s where the money is.” The lack of robust cybersecurity measures in these offices is alarming. With only 29% reporting sufficient staff and training programs, the gap between awareness and action is evident. This vulnerability not only risks financial loss but also damages reputations and trust.
What’s Next?
Family offices must shift from a reactive to a proactive cybersecurity stance. Experts recommend addressing tech risks across hardware, software, and applications. Moving away from email communications for sensitive information, using password vaults, and vetting tech vendors more rigorously are crucial steps.
Edward Marshall stressed the need for a mindset change from “accepting the unexpected to expecting the unexpected.” The emphasis should be on comprehensive risk assessments and regular updates to cybersecurity policies and staff training programs.
Family offices lag behind in cybersecurity compared to other financial institutions. This vulnerability could lead to increased scrutiny from clients and regulators, potentially impacting their market standing.
Investors should monitor how family offices adapt to these challenges and whether they invest in better cybersecurity infrastructure. This trend highlights the broader issue of cybersecurity in wealth management and the need for industry-wide standards and practices.
