The threat of cyberattacks is a growing concern for family offices, and many are ill-prepared to fend off increasingly sophisticated cybercriminals. A recent survey by global law firm Dentons highlights this alarming trend and the urgent need for better cybersecurity measures among these entities.
Increased Risk and Rising Attacks
According to Dentons‘ survey of single-family offices, a staggering 79% of North American family offices believe that the likelihood of a cyberattack has surged dramatically in recent years. The data is sobering: in 2023, a quarter of these offices reported experiencing a cyberattack, a notable increase from 17% in 2020. Additionally, half of the respondents are aware of another family office falling victim to cybercrime.
Why Family Offices Are Attractive Targets
The combination of vast wealth and small, often understaffed, operations makes family offices particularly appealing to hackers. Edward Marshall, Dentons’ global head of family office and high net worth, refers to this as the “Willie Sutton effect,” named after the infamous bank robber who targeted banks for their money.
Marshall explains that family offices typically employ minimal staff access to susceptible financial and personal information. The drive for efficiency and speed often outweighs the focus on risk management, leaving these offices vulnerable to cyber threats. “Family offices often have a bias toward efficient service versus security,” Marshall notes.
Challenges in Cybersecurity Implementation
The survey reveals a significant gap between the awareness of cybersecurity risks and the implementation of effective defenses. Less than a third of family offices report having well-developed cyber risk management processes. Only 29% believe their staff and cyber-training programs are adequate, and fewer than half have taken steps to enhance staff training or regularly update their cyber policies.
“These findings reveal an alarming gap between awareness of cybersecurity risks and the actions put in place to prevent and repel attacks,” the report emphasizes.
Recommendations for Strengthening Cybersecurity
A separate report from EY U.S. and the Wharton Global Family Alliance provides a roadmap for family offices to bolster their cybersecurity posture. Key recommendations include addressing the three main components of tech risk: hardware, software, and applications. Practical measures such as using secure websites or intranet sites for sharing financial and personal information, employing password vaults, and thoroughly vetting tech vendors for security are advised.
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Marshall stresses the need for a proactive approach to cybersecurity, urging family offices to shift their mindset from accepting the unexpected to anticipating it. “They need a mind shift from accepting the unexpected to expecting the unexpected,” he concludes.
In summary, as cyber threats continue to escalate, family offices must prioritize cybersecurity to protect their wealth and sensitive information. The insights from these reports highlight the critical need for improved defenses and proactive risk management strategies to safeguard against the ever-evolving landscape of cybercrime.
