Private Family Office: Cybersecurity Overview

In private family offices, cybersecurity is not just a technical issue but a critical element of strategic security risk management. The largest consulting firms, such as Deloitte and Dentons, paint a concerning picture of the current cybersecurity posture. The findings reveal a general underestimation of threats and a complacency towards risk management that could have severe repercussions for the wealth and privacy of ultra-high-net-worth individuals and their families.

Current Challenges

Family offices are uniquely vulnerable to cyber threats due to their handling of extensive personal and financial data. Despite this, there seems to be an established mindset of underestimation concerning the likelihood and potential impact of cyberattacks. Dentons' research indicates that over a quarter of family offices have experienced a cyber attack, with the majority occurring in recent years. This statistic alone should serve as a wake-up call, yet many smaller and newer offices continue to prioritise cost and convenience over security, often to their detriment.

The insider threat is another significant concern. More than 80% of family offices do not conduct periodic checks on personnel, creating a blind spot in their security frameworks. With over half of the offices only screening staff at the point of hire, the risk of insider threats, both malicious and unintentional, remains high. The limited staff and lean nature of many family offices only exacerbate this risk, granting employees outsized access to sensitive information.

Established family offices that have previously faced security breaches tend to have a better understanding and implementation of cybersecurity measures. In contrast, newer offices often focus primarily on investment opportunities, neglecting the integral aspect of security until it is too late.

CyberSecurity Implementation

The global risk environment is constantly evolving, with cyber threats becoming more sophisticated. As highlighted by qualitative data from Deloitte and PWC, family offices are often unaware of how much of their information is publicly accessible online. This exposure includes and affects, personal identities, reputations, travel schedules, and business dealings, among others.

The reliance on external vendors for cybersecurity needs should align strategically to the unique needs of family offices. This is particularly appropriate considering that, as IBM reported, 60% of attacks in recent years have involved insiders. Deloitte also suggests that as part of the family offices risk management, cyber risk and physical security should be most often outsourced.

External Consultants

Given these complexities, there is an urgent need for family offices to adopt a more institutional approach to cybersecurity. External security risk management consultants can offer the specialised expertise required to address these vulnerabilities holistically. Hiring an external consultant who can develop integrated plans that take into account both proactive and reactive security measures, aligning them with the family's overall risk management objectives is most appropriate.

Engaging with external consultants allows family offices to benefit from specialist intervention, comprehensive risk assessments, and bespoke security protocols that consider both technology and human factors. This approach not only enhances the security infrastructure but also ensures that family offices are prepared for the various global risks.

In conclusion, as the digital landscape continues to evolve, the importance of implementing robust cybersecurity measures in private family offices cannot be overstated. The engagement of external security risk management consultants offers a path forward to address these critical vulnerabilities effectively, ensuring the long-term safety and security of the families' wealth and private information.

Bibliography

BDO (2019) Family Office: Blueprint.

Deloitte. (2021) Protecting Legacy: The Value of a Family Office.

Dentons. (2021) Surveying the Risk and Threat Landscape to Family Offices: Insights and Recommendations.

HM Government. (2022) National Cyber Strategy 2022: Pioneering a cyber future with the whole of the UK.

Institute of Risk Management. (2024) Risk Trends 2024.

ISACA. (2023) State of Cybersecurity 2023: Global Update on Workforce Efforts, resources and Cyber-operations.

Morgan Stanley. (2020) Private Wealth Management: Single Family Office Best Practices Report.

PWC. (2019) Creating an effective cyber-protection plan fort your family office: It is possible to manage cyber risks while taking full advantage of digital technology.

Winkworth Sherwood. (2018) Family Offices & Privacy: A Shield and a Sword.