The recent increase in digital transactions and remote work presents new threats and vulnerabilities for organizations handling high volumes of sensitive financial data, such as private equity and venture capital (VC) firms. Therefore, they have become prime targets for criminals looking to deploy cyberattacks, including ransomware and business email compromises (BECs).

According to a report, financial institutions witnessed an 80% increase in cyberattacks in recent years. However, a mature cybersecurity program can help organizations identify, protect, respond, and recover in a way that meets each organization’s unique data security risks per their size, service, industry, or technology architecture.

This article explores the importance of the cybersecurity risk maturity model for financial institutions like private equity and VC firms.

Cybersecurity Risk Maturity Model for Private Equity and Venture Capital Firms

The cybersecurity risk maturity model is a framework for organizations to measure the maturity of their security program and how to reach the next level. The maturity model comprises various processes, tools, and human resources working together to mitigate risks. It helps assess their cybersecurity processes or capabilities periodically and focuses on protecting against advanced persistent threats actors. A risk maturity model effectively improves the organization’s cybersecurity posture and establishes strong communication with the C-suite to pinpoint support requirements.

Comprehensive cybersecurity visibility into the organization’s digital ecosystem and vendor network is necessary for maturity models to function correctly. With greater visibility, organizations can refine their security and risk programs to align their practices with their preferred cybersecurity model. Cyberattacks and data breaches can compromise the profile of potential client businesses. Moreover, multiple unaccounted cyberattacks can dilute the portfolio and reduce the firm’s value. Government regulations and data privacy laws like GDPR and CCPA urge organizations to strengthen their cybersecurity measures and limit unnecessary data collection.

Therefore, a cybersecurity risk maturity model can help private equity and VC firms to follow the laws and achieve compliance. In addition, the growing use of IoT devices and remote work results in a widening attack surface for organizations, which a cybersecurity risk maturity model can help manage efficiently.

There are several cybersecurity risk maturity models. The most prominent models are the National Institute of Standards and Technology (NIST CSF), the cybersecurity capability maturity model (C2M2), and ISO 27001. Implementing a cybersecurity risk maturity model helps the organization manage its information security processes to ensure they are functional and fully optimized across the board. It also helps to understand and identify weaknesses in organizational processes. In addition, not complying with national or international cybersecurity and data privacy laws can have legal implications for organizations.

Creating a Cybersecurity Baseline for Investment Portfolios

According to a research report, on average, financial services take 233 days to detect and contain a data breach. The average eight-month resolution time is enough to damage reputations, revenues, and customer faith severely. Thus, tailoring the cybersecurity capability maturity models to the organization’s requirements exemplifies cybersecurity best practices and security standards.

The cybersecurity risk maturity model is vital for private equity and VC firms to address their security gaps and plan a security roadmap with expert guidance. The maturity model itself, cybersecurity best practices, and the maturity assessment help in strategic decision-making and effective allocation of resources. Therefore, creating a security baseline for investment portfolios allow private equity firms to understand what normalcy looks like in their computing infrastructure and network domain. Secondly, having a security baseline creates the starting point for determining the risk appetite of a private equity firm.

Finally, when an organization has a cybersecurity baseline, they effectively establish a set of security controls through strategic planning to address security categorizations and achieve a resilient security posture. Creating a cybersecurity baseline is necessary to ensure that organizations comply with industry standards and government regulations surrounding corporate data. It is the bare minimum that organizations must implement to sufficiently protect themselves from any vulnerabilities and threats while continuing to function effectively. 

Developing a Cyber Risk Maturity Strategy

Cybersecurity threats are increasing in terms of volume, severity, and complexity. The use of sophisticated attack vectors in the changing cyber threat landscape demands a change in how organizations perceive cybersecurity. Most cybersecurity maturity models consist of five levels. Each level indicates the organization’s stage of security process optimization.

Whereas the initial maturity level consists of an ad hoc process, the consecutive maturity levels establish security controls, roles, and responsibilities and standardize processes. Security integration into the organization’s culture and business process are complete at the final maturity level. Financial institutions or investment firms like private equity and VC must identify the critical functions for a cyber risk maturity strategy.

Developing a cyber risk maturity strategy can help organizations move seamlessly through all these levels, allowing data processes to operate smoothly with constant optimization and monitoring. Below are the key steps to follow for developing a cyber risk maturity strategy:

• Evaluation: Select a wide range of internal evaluators, including operational and managerial indicators, and probe their maturity levels regarding how they respond to cyber risk management standards. This evaluation will determine the maturity levels for each integral part of your organization, especially critical business segments.
• Analysis: Security experts can detect the gaps in performance from the evaluation report. They can thus analyze the information to determine their nature.
• Prioritize and plan: In this step, security teams prioritize the gaps that require immediate attention according to cost-benefit analysis or their importance to business objectives. Post-prioritization, it is time to plan the action.
• Implementation: The final step in developing a cyber risk maturity strategy is implementing all the plans and periodically evaluating their progress. Periodic evaluation helps monitor the model’s maturity and improvement at the required rate.

Conclusion

Cyber threats are not slowing down, and financial institutions must prepare themselves for security incidents. Rapid digitization and widening attack surfaces require a well-designed strategy to implement cybersecurity best practices and regulations across any organization.

A cybersecurity risk maturity model is a great way to measure and improve an organization’s security capabilities and processes. However, its effectiveness depends on continuous management and attention. Therefore, private equity and VC firms can improve their security posture with a solid cybersecurity risk maturity model.