Date: 3 April 2023
It's no news that the banking sector is a prime target for cybercriminals. Cybercriminals seek to steal the volumes of precious financial data that banks hold, extort money, and/or disrupt bank operations. With the rise of cybercrime and the potential for huge financial losses, banks and financial organisations must be the first to prioritise cybersecurity and have an effective risk mitigation plan. A successful attack on a financial institution could result in millions of dollars in losses and irreparable damage to business reputation.
On your visits to a bank, you've probably seen a sign behind the teller that reads, "Your Security is Our Priority." You feel reassured that your money and data are safe thanks to their online data protection strategies with this institution. But have you ever wondered what goes on behind the scenes to ensure your bank is secure? Let's take a look...
What is Cyber Risk Mitigation in Banking & Why is it Important?
As we have discussed, banks and financial institutions are amongst the most vulnerable to cyber risks.
Risk mitigation refers to identifying risks which can be done through a risk assessment. You then need to prioritize these risks i.e. place them in an order of priority for your specific organisation. Next comes identifying the types of risk mitigation strategies that will work for you - strategies that will help you monitor, reduce and mitigate the risks. To put it another way, risk mitigation for the financial sector is all about anticipating potential dangers in advance and taking preventative measures for risk avoidance.
And when it comes to Cybersecurity, Risk Mitigation is essential. Banks are prime targets for cybercriminals because they hold a treasure trove of valuable information, including personal and financial data.
Anti money laundering for banking is critical to risk mitigation and cybersecurity. AML aids in detecting, deterring, and preventing criminals from unauthorized access to financial institutions to launder illegal funds or commit other financial crimes.
Banks must exercise due diligence in identifying and monitoring customers, transactions, and other activities to spot suspicious activity. Banks must also ensure that their processes and systems are secure and resilient to avoid cyberattacks and other malicious activities.
Cybersecurity & Risk Mitigation Strategies for Banks
Here are some critical Risk Mitigation Steps that Banks and Financial Institutions take to keep their critical infrastructure secure and their sensitive customer information safe:
1. Having A Robust Risk Mitigation Strategy:
Risk mitigation involves the following best practices:
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Establishing a practical risk management framework: This framework should include a clear definition of the bank's risk appetite, identification and assessment of potential risks, risk monitoring, and an effective control system.
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Implementing a risk-based capital adequacy framework: A risk-based capital adequacy framework is essential to ensure the bank has enough capital to cover potential losses. This framework should include the definition of risk categories, the determination of capital requirements, and the measurement of capital adequacy.
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Adopting a comprehensive risk management policy: Banks should adopt a complete risk management policy that outlines their approach to risk management, the roles and responsibilities of risk management personnel, and the process for identifying, measuring, monitoring, and controlling risks.
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Enhancing operational risk management: Banks should improve their operational risk management processes to ensure proper internal controls, operations are efficient and effective, and potential losses are prevented.
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Strengthening internal audit: Banks should maintain internal audit processes to identify, monitor, and control risks. Internal audits should have sufficient authority.
2. Use of Robust Encryption Protocols
Robust encryption protocols in banking refer to using secure encryption techniques to protect sensitive information and transactions. Sounds familiar? Think 2FAs, access controls, and firewalls to ensure that only authorized users can access sensitive data and transactions.
Encryption involves converting plain text into coded or scrambled text, which someone with the correct key can only decipher to unlock. In banking, robust encryption protocols are critical to ensuring the security and trustworthiness of the banking system.
3. Use Of Firewalls & Intrusion Detection Systems To Monitor For Suspicious Activity
We always hear about cyber attacks and data breaches in the news. Banks use firewalls and intrusion detection systems to protect themselves from these threats.
A firewall is like a barrier between a bank's internal network and the internet. It can control the traffic in and out of the network and filter out any unwanted or suspicious traffic. It's like having a bouncer at the door of a club who checks everyone's ID to ensure only authorized people get in.
Firewalls can be set up to block certain types of traffic, like incoming traffic from specific IP addresses or certain types of applications or protocols that could be used for malicious purposes.
Intrusion detection systems (IDS) are another layer of protection that banks use to monitor their networks for suspicious activity. An IDS can detect patterns of activity that are indicative of a cyber attack, like multiple login attempts from different locations or an unusual amount of data being transferred in a short period. It's like having a security camera in a store that alerts the security guard if someone is acting suspiciously.
4. Employee Training
Many cyber attacks involve social engineering tactics such as phishing or pretexting. These attacks often exploit human vulnerabilities and trick employees into divulging sensitive information or clicking on malicious links. Employee training in cybersecurity can help prevent these attacks by teaching employees how to recognize and report suspicious activity.
Cybersecurity training can help mitigate these risks by providing employees with the knowledge and skills to protect themselves and their organisation from cyber threats. This includes training on password security, data encryption, email security, and cyber incident planning and response training.
5. Cyber Incident Response Plans
In aviation, pilots are given a checklist they must go through in case something untoward happens mid-flight. This checklist tells them everything they must do to quickly avert danger and control the situation.
A Cyber Incident Response Plan is pretty similar. It contains a set of instructions telling the management team and the IT team what to do in the event of a cybersecurity incident. It helps minimise the damage caused by the incident, recover quickly, and maintain the trust of their customers. Most importantly, it can greatly reduce the financial impact of an incident.
For example, if a bank's system is hacked and customer data is stolen, the incident response plan would outline steps for identifying and containing the breach, communicating with affected customers and the right authorities, and preventing future incidents.
An Incident Response Plan is essential because it allows banks to manage risk proactively. Banks can reduce the likelihood and impact of cybersecurity incidents by anticipating potential threats and preparing for them in advance. Plus, regulatory requirements mandate that banks have a contingency plan, so it's not just a good idea; it's a requirement.
For those financial institutions that either don’t have the requisite cybersecurity plans, processes and policies or need to update them, hiring a cybersecurity professional is an important investment. Cost-effective and fully remote cybersecurity specialists like Virtual Cyber Assistants can be invaluable here.
Final Thoughts
Cybersecurity is a key component for banks to build customer trust. Banks must ensure they have robust cyber security policies and procedures and that their employees are trained to protect customer data.
Customers, then, will feel more confident about their financial security. And this trust can lead to more customers using the bank's services, as they know their data is secure.
As John Chambers famously said, 'There are only two types of organisations: Those that have been hacked and those that don't know it yet!' Therefore, it is also wise to be prepared and stay ahead of the advanced cyber criminals as far as possible.
About the Author: Ale Oluwatobi Emmanuel
Ale Oluwatobi Emmanuel is a freelance SEO content writer for SaaS and web 3 brands. With several published by-lines in notable tech websites, he’s passionate about tech, and the innovations that come with it. In his leisure time, he listens to music and plays classical piano.
Reach Ale via aleoluwatobiemmanuel@gmail.com
