Navigating Family Office Cybersecurity Challenges

All businesses, no matter the size or industry, must deal with at least some amount of cyber threat. However, family offices — especially those that serve high-net worth individuals — have a specific set of difficulties and concerns with respect to cybersecurity and the protection of their executives.

Family offices have other privacy concerns, too, as well as the complexity of navigating family dynamics. A standard cybersecurity tool typically won’t work; family offices usually need a customized tool, and that takes time and effort. Let’s consider the unique issues that this type of business faces and what they need to remain secure.

Threats to the family office

Because family offices manage a great deal of wealth and sensitive information, they are targets for attacks via ransomware, phishing and social engineering. Research by the Dentons law firm found that 45% of family offices cited cyber and data security as a top threat. And 33% of family offices said they have a “reactionary rather than preventative approach,” up from around 25% in a previous study.

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At the same time, the Global Family Office Report 2023 by UBS found that many of these offices are not keeping up with cybersecurity best practices — even though 37% of them have been targeted at least once.

These offices also might face insider threats, either malicious or accidental. Because of  the variety of relationship dynamics and potential relational stressors within families, the risk of insider threats can be higher.

Then there is the risk of “cyber kidnapping.” Because family offices manage significant wealth as well as sensitive financial information, they face potential physical threats from real-world criminals who might target family members or try to gain access to the family office’s premises. For the same reasons, family offices are particularly vulnerable to ransomware attacks.

Family office realities

Family dynamics can create unique challenges for family offices. The show Succession comes to mind. Because they manage not just financial but also personal matters, family offices must sometimes wade into disputes that are complex and occasionally emotionally charged. This requires a nuanced approach that considers both necessary security and interpersonal rapport. There’s also no clear-cut approach to access controls because family members can wear more than one hat, and this fact can also affect family dynamics.

Financial constraints are also a factor. Unlike large enterprises, family offices may not have the budget for modern security infrastructure and/or an IT security team. And some offices don’t invest in adequate security even if the funds are available to do so. Family offices have around $2 billion worth of assets on average, but, according to data from Campden Wealth, allocate only $48,000 for cybersecurity.

In addition, many family offices lack the needed in-house expertise or cybersecurity staff. That limits their ability to stay current on the latest threats and prepare defenses accordingly.

Resistance to change is also a problem. Employees or family members may be set in their ways or reluctant to try new security protocols or technologies for fear of upsetting family dynamics or work routines. Meanwhile, according to Campden Wealth’s 2023 North America Family Office report, 40% of family offices are worried outdated technology is adding to their security risk.

While family offices typically don’t suffer from excessive complexity or lack of flexibility, as large enterprises do, it can be difficult to deploy new security measures without hampering agility. Cybersecurity solutions must be scalable to meet the changing needs of cybersecurity, wealth management and family dynamics without interrupting operations.

Security for family offices

A family office’s approach to cybersecurity should balance processes and technology. A cybersecurity plan for a family office should include six essential elements:

1. Robust access controls and authentication: Deploy role-based access controls (RBAC) and robust authentication methods like multi-factor authentication (MFA).

2. An emphasis on Digital Executive Protection (DEP): Protect executives’ online identities, including deep/dark web monitoring and personally identifiable information (PII).

3. Network security and firewalls: To monitor and control all network traffic, use network security solutions and strong firewalls.

4. Antivirus software and endpoint security: To protect against viruses, malware and other threats, install antivirus software on mobile devices, laptops and all other devices — and keep that software up to date.  

5. Awareness and training: Train family members and employees on an ongoing basis about good “cyber hygiene” and how they all play a part in keeping the network safe.

6. Encryption and regular data backups: Make sure to apply encryption to sensitive data — whether it’s at rest or in transit — and back up critical data frequently.

Securing for the future

Family offices have a unique set of cybersecurity challenges. They manage substantial wealth but don’t allocate much of it for cybersecurity. This makes them prime targets for malicious actors, which means they need robust cybersecurity immediately. Though it can be hard to change, it’s necessary. The six elements discussed above will help family offices lay a strong security foundation for themselves and for the generations to come.

About the Author

Trinity Davis

Trinity Davis is the managing director of 360 Privacy.


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