Report Reveals One-Fifth of Family Offices Vulnerable to Cyberattacks
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According to the International Monetary Fund (IMF), the amount of “extreme financial losses” businesses suffered because of cyberattacks has more than quadrupled since 2017. Because businesses in the financial services sector have an abundance of sensitive data and high-dollar balances, they have been hit especially hard by cybercriminals. The IMF estimates that “attacks on financial firms account for nearly one-fifth of all cyberattacks,” costing firms more than $12 billion in the last two decades.
According to the IMF, banks, insurance companies, asset managers, and similar organizations have shouldered most losses. Although its research doesn’t mention family offices (FOs), additional data released by JP Morgan Private Bank data confirms that, as of 2024, about one in four FOs have been victimized by cybercriminals.
[Read About What Steps Family Offices Should Take to Compete.]
Although JP Morgan’s 2024 Global Family Office Report found that 25 percent of FOs have been exposed to a cyber security breach or financial fraud, one in five FOs have no cybersecurity measures in place.
Family Office Service ‘Gaps’
Family office vulnerability may be unexpected in light of the growing popularity of FOs worldwide. As Avestix previously shared, while there are slightly more than 8,000 FOs now doing business around the globe, analysts predict that number will grow to nearly 11,000 in the next five years. JP Morgan's 2024 data — based on surveys of 190 family offices around the world — indicates that FO executives are keenly aware of their cybersecurity shortcomings.
When asked about the “gaps” in the services they provide their clientele, 40 percent of respondents said cybersecurity — making it the leading gap. Family governance, succession planning, and family wealth education all followed at 31 percent. “The emphasis on cyber risk is unsurprising,” the study found, “given that 24 percent [of FOs] report being exposed to a cybersecurity breach or financial fraud, even as more than one in five offer no cybersecurity services.” If there is a lack of focus on cybersecurity — both in the services FOs offer clients as well as within their operations — it could be a reflection of the makeup of C-Suites in family offices.
When asked about leadership structures, survey respondents most frequently — 36 percent —said Chief Executive Officers (CEOs) and/or Presidents oversaw operations. Chief Financial Officers (CFOs) were in place at 28 percent, while Chief Investment Officers (CIO) helmed operations at 25 percent. “Despite the increasing importance of the role of technology and risks of cyberattacks, only a small percentage of family offices globally have a dedicated Chief Technology Officer,” the report finds. Nowhere in the 94-page overview of family offices, is there any mention of a Chief Information Security Officer (CISO) or any analogous roles.
How Family Offices Can Make Cybersecurity a Market Differentiator
This is not to suggest FOs aren’t prioritizing cybersecurity.
“In this era of rapid technological change, many family offices find that outsourcing the technology function allows them to keep up with new platforms and capabilities without the burden and expense of building their own,” according to the report. “The continued and rising threat of cyberattacks on family offices is another reason to work with external advisors that can provide much-needed technology-risk-management services.”
Fifty-eight percent of FOs use a technology platform to address their cybersecurity needs, according to report findings, while 37 percent require their staffers to complete cybersecurity training. One-third — 33 percent — work with defense providers. Only 8 percent have in-house cyber defense teams. It’s unclear if — as the family office landscape grows — relying on technology platforms, internal training, or third-party providers alone will be enough to stay competitive in what is becoming a crowded family office field.
As The 2024 Global Family Office Report makes clear, cyberattacks and fraud scams become more sophisticated each day, and the cost of cybercrime now runs into trillions of dollars. “If [cybercrime] were an economy, it would be considered the third largest behind the United States and China,” says the report. If family offices hope to thrive in the years to come, they must make cybersecurity a priority, and those that do so immediately might be giving themselves an important competitive advantage.
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