A usual scenario that is followed in most of the organizations in relation to managing assets of the company at the time of accidental data or server collapses is to be pre-prepared for it. Designing and incorporating a proper disaster recovery plan is must to make cloud architecture efficient most.
Even if you haven’t left any loop behind in terms of prevention of your data on cloud, there are possibilities of unpredictable technical faults that can emerge anytime. An efficient disaster recovery plan is that, which starts functioning with agility and has quick response time.
Although, aforementioned reasons and facts are there to prove the relevance of a disaster recovery plan in cloud technology, there are other facts as well that can be considered vital. The subject of hedge fund operational due diligence is one that has risen to the forefront for both hedge fund managers and investors in recent years. Historically, there has been a general lack of transparency within the hedge fund industry; larger funds, in particular, often balked at investor inquiries. Due diligence, as a process, did not gain significant importance until just a few short years ago. Hedge funds managers and investors are now taking due diligence seriously and making conscious steps to maintain open communication and increase information-sharing. Operational excellence has become one of the most important factors to hedge fund investors today as they determine where to allocate their money. What service providers are you engaged with and how do you determine their quality of service? Investors need to understand why hedge funds have made each of their operational choices, including when it comes to technology. Investors have become much more aware of technology and how important a role it plays in the day-to-day operations of a hedge fund. Hedge funds should be prepared to recover from both short- and long-term disasters and be prepared to outline their processes and procedures (in writing!) to investors.
Hedge fund operational due diligence is an opportunity and a marketing exercise – one that funds should undertake with educated personnel and a willingness to be open and transparent. Many firms create a 10-20-page written information security plan that formalizes the definitions and policies that govern the creation, access, and deletion of confidential information and computing services.
Regulatory Risks – Following the right security practices will enable you to achieve clean audits from industry and government regulators. Personal Email – Even if your employee is following all of your processes and practices with work-related email, you could still be vulnerable if her private, personal email is breached or corrupted. By developing an internal culture of security, the organization does far more than deploy and configure bits and bytes. Show investors that you have a 3+ year budget for working capital without any performance fees. Make sure to properly allocate expense and investment opportunities if you decide to launch a single investor fund or separately managed accounts. When it comes to seed arrangements, pick the right partner and put parameters around potential issues that could arise. Become familiar with the changing expectations on the cybersecurity front, from both investors and regulators. The Cybersecurity Interpretive Notice applies to all membership categories--futures commission merchants, swap dealers, major swap participants, introducing brokers, forex dealer members, commodity pool operators and commodity trading advisors. But whatever approach is taken, the Cybersecurity Interpretive Notice requires Members to adopt and enforce an information systems security program (ISSP) appropriate to its circumstances.
Description of ongoing education and training related to information systems security for employees. NFA recognizes that some Members may face a significant challenge implementing ISSPs by the March 1, 2016 effective date, and any programs that are adopted will be refined over time.
Eze Castle Integration’s Cybersecurity Practice Team is available to create Written Information System Security Programs for firms. Operating capital may be limited in the first few years after your launch, so careful budgeting and long range planning will serve your firm well. Governmental oversight of the financial industry has evolved dramatically in the last decade.
Apart from registration, you should also determine if there are any legislative implications for your new firm. Since 2014, cybersecurity preparedness is also a critical area of focus for regulatory bodies.
Cloud services offer more flexibility than traditional infrastructure models and, beyond cost-savings, can reap rewards for new launches. Of course, one of the greatest benefits to using an outsourced cloud service is professional management and monitoring.
Beyond infrastructure safeguards, it is critical that firms implement policies and procedures to protect firm and client assets. While the list of considerations is surely long for new hedge fund managers, we've whittled it down to 10 Keys to Launching a Hedge Fund Successfully - a guide for new startups to use when setting off on their new journey.
Communicate – It is important to let your employees know as soon as possible that they will no longer be able to get to work. Technology – Technology has facilitated the ability for an employee to work remotely during a storm, but there are still some considerations to think through. Hunker Down –During severe storms employee safety should be at the top of the priority list. Set Workload Expectations – As an employee, a storm can be disruptive to their normal work day. Updates – As a consistent theme throughout BCP, communication is key, and continued updates will keep the employee centered on their work and allow them to respond to changes quickly such as the reopening of the office building. According to the National Oceanic and Atmospheric Administration (NOAA), El Niño conditions occur when abnormally warm waters accumulate in tropical latitudes of the central and eastern Pacific Ocean. La Niña conditions occur when cooler-than-average waters accumulate in the central and eastern tropical Pacific and tropical rains shift to the west. The key to a successful business continuity plan lies in understanding the impact a disaster situation could have on a business and creating policies to respond to any such impact. The final critical element of a BCP is ensuring that it is tested and maintained on a regular basis. Or contact Eze Castle Integration to speak with one of our certified business continuity planners about best practices or to learn about why leading hedge funds rely on Eze Business Continuity Planning Services. We spend a lot of time educating our clients about security best practices and encouraging them to implement comprehensive security policies and procedures to mitigate risk and protect both the firm and its employees. While companywide policies should reflect long-range expectations and corporate best practices, they should also include tactical recommendations that employees can follow to ensure they are complying with the company’s overall risk strategy.
Provide information such as login IDs, passwords, social security numbers, account numbers, etc. It is no surprise that the investment industry landscape is becoming more and more competitive. A comprehensive DDQ covers a wide range of topics, from assets under management to audited financial statements and investment strategies.
So, to help you get started, we have compiled the following list of some frequently asked DDQ questions. Does the firm have established, documented service level agreements in place with its technology partners to ensure a stable computing environment? Is the policy regularly reviewed to determine whether the controls are operating as intended? Do the appropriate management officials approve the policy and any changes that may be made?
Does the firm’s IT staff (or technology partner) ensure appropriate access control to applications and sensitive company data? Is a solution in place to ensure mobile devices and laptops are secure in the event of loss or theft? Has the firm established a dedicated location to retain backup copies of all critical data? Has a secondary working location been established to which employees should report in the event of a disruption or outage?
Is a comprehensive disaster recovery solution in place to provide system redundancy and ensure protection of critical data in the event of a disaster or system failure?
Has the firm determined its crucial recovery point objectives (RPOs) and recovery time objectives (RTOs)? A component of Disaster Recovery that deals with the restoration of business system software and data, after the operating system environment has been restored or replaced.
A pre-identified group of individuals that is reponsible for maintaining and executing the recovery process. A system of planning for, recovering and maintaining both the IT and business environments within an organisation regardless of the type of interruption. A collection of information on a wide range of areas from recovery assumptions and critical business processes to interdependencies and critical staff that is then analysed to assess impact a disaster may have. The process of restoring and maintaining the data, equipment, applications and other technical resources on which a business depends. A disaster recovery hot site is a remote physical location where you can maintain copies of all of your critical systems, such as trading applications, data, and documents.
A computer system or application that is essential to the functioning of your business and its processes. In the context of a primary and secondary site, the primary site contains the original data that cannot be recreated.
The RTO is the duration of time and service level within which a business process must be restored after a disruption in order to avoid unacceptable losses. The RPO is the point in time to which a firm must recover data as defined by the organisation. A system of using multiple sources, devices or connections so that no single point of failure will completely stop the flow of information. The identification and prioritisation of potential business risk and disruptions based on severity and likelihood of occurrence.
The secondary site contains information and applications that are built from the primary repository information. If regular testing is a critical component of an effective DR solution, why do many firms fail to do so? Here at Eze Castle, we strive to educate our clients on different testing methods so that they find an option that best meets their unique business requirements. As we continue to educate our hedge fund and investment firm clients on disaster recovery testing methods and the available options, we have seen a drastic increase in the number of clients that elect to implement regular testing procedures. A: Users should verify that they have the functionality needed to work successfully from the DR site during a disaster. A: If a firm fails to test its DR systems, they run the risk of the DR site not meeting current business requirements during a disaster. Q: Will testing our disaster recovery site disrupt our production site (and therefore normal business operations)?
Since we frequently work with our hedge fund and alternative investment clients on developing comprehensive business continuity plans (BCPs), we feel it is important to review and test our own BCP procedures on a regular basis to ensure they will meet our most current business needs in the event of a disaster. A BCP table top exercise is an informal brainstorming session used to encourage participation from business leaders and other key employees.
Gather the firm’s executive team (and any other individuals within the organization that play a leadership role in the BCP activation process) in a conference room-type setting that is conducive to open discussion and interaction. To begin, the consultant or group leader should develop a hypothetical disaster scenario to use as an example. Once the scenario has been established, the members of the management team will break down what steps need to be taken (and in what order) to ensure all employees are safe and accounted for, communications are made to all necessary parties and the business remains operational.
A company’s ability to recover quickly from an unexpected disruption is directly associated with the quality of the preparations that have been completed prior to the event. Being able to quickly communicate and respond in the case of a business continuity emergency or interruption can make a big difference to building management and tenants alike. During non-business hours, if there is an interruption or emergency occurring, facility management will most likely notify all tenants and provide updates until the event is over.
Meeting with building management to review emergency procedures and contact information should be done at least annually, even if there isn’t turnover in either organization. The following are key points building management and firms should address and be aware of to help ensure effective communication during scenarios of emergencies and interruptions.
Any successful business is a product of the time, sweat, and forethought that went into it’s creation . Training of  employees, testing of the possible scenarios, and rehearsal of the response according to the plan. After going through the process of creating a sample plan, the team members  come to see many aspects of their company in a new light. Outlined in this section are ten key points as to the importance of planning disaster recovery strategies. In the event of a disaster, a disaster plan will allow a company the ability to quickly and efficiently go back to a state of production by providing methodologies to lessen the impact of said disaster and a process to get the company back into a productive normal state.
A Disaster Recovery Plan should be able to scale to the event.  Meaning the plan should be able to work with an act of terror to the facility to something as simple as an employee tripping over the power cable and unplugging a few key systems. A Disaster Recovery Plan will put in place a means to safeguard a company’s key information assets. The plan will help companies to meet government regulatory standards.  This is important to maintain compliance with these standards and keep in good standings with other companies. A Disaster Recovery Plan will show customers that the company is serious about success and give them added confidence about the organizations abilities to overcome any adversity. Due to the increased dependency of the business over the years on computerized production and research and development,  in creased risk of loss if one of these systems were to go down.  With a well documented Disaster Recovery Plan, its possible to mitigate any damage done to the business due to the loss of one of the said computerized systems.
The Disaster Recovery Plan will allow for concise documentation of polices and procedures for the organization. For employees, the training brought about the Disaster Recovery Planning process will be valuable as it will prepare them to react quickly and intelligently in the event that a disaster occurs. The plan will provide a means identify key people within the organization to help out in the event of a disaster.  These key people will allow the staff to have someone to “turn to” in the event that something happens to provide guidance and give direction. Most large companies have a IT Disaster Recovery and Business Continuity plan which they revise regularly and test.
Even in the event of a small disaster such as a web server crashing, an key employee becoming sick or the loss of your invoicing system, a Disaster Recovery Plan will help in the quick recovery and continuation of your business without too much disruption.
The most common disruption to business is data loss, which can result from computer system hardware failures, theft, human error, natural disasters, theft, malicious corruption, virus attacks, etc.
Ensure that backups of all your key data is carried out regularly, stored off-site an available for recovery. Please download our Free Disaster Recovery Plan Check-list to help you plan ahead to keep your business running in the event of a disaster. Disaster Recovery Planning, Third Edition is a comprehensive, up-to-the-minute, IT professional's guide to planning for disaster recovery without hiring expensive consultants or implementing proprietary methodologies.
But there is another trap you should be wary of, and that’s the one hackers are setting for you right now. A cyber attacker will send you a message that appears to be from a reliable source, prompting you to open it.
In traditional phishing, cyber criminals send out messages to millions of users trying to infect as many users as possible. The cybersecurity landscape is constantly changing and today the cyber threat actors range from organized crime to state sponsors.
When it comes to advanced persistent threats, the cyber criminals often use targeted social engineering tactics including spear phishing. Real-time intrusion detection and prevention systems that include 24x7 monitoring by security experts are a key defense in finding and stopping network intruders. We at Eze Castle Integration have identified the top four reasons why backups are critical to not only a firm’s growth, but also their survival. The Securities and Exchange Commission (SEC) has instituted regulations on the storage of financial records and electronic communication, and financial industry regulatory agencies such as FINRA now provide standards and guidance information on potential threats. The reasoning behind these recommendations is the volume of things that can go wrong with your data storage solution. Regulatory and compliance organizations recognize the necessity of data security and advocate for firms to have a comprehensive backup solution in place. As reported by Gartner in the 2015 Gartner MQ Report for Enterprise Backup Software and Integrated Appliances, by 2017, the number of enterprises using the cloud as a backup destination will double, growing from twelve percent (12%) today.
Consider the impact to your business if you lost the data held in your CRM, financial, or reporting systems. Backups should be an integrated part of not only the IT department, but of the overall business strategy.
Businesses invest large amounts of time, money and resources into their operations; however, most are lacking a plan to protect this hard work. Because the security of data is imperative, it’s critical that firms choose the right provider to maintain tight control and visibility over business critical information. In some cases, however, insurance coverage has not satisfied the demands of firms and instead left them feeling scammed a second time. One example of this comes from Texas where a manufacturing firm is suing their cyber insurance provider for refusing to cover a loss that came at the hands of a phishing scheme. Situations like these are reminders for Chief Financial Officers and Risk Officers to carefully comb their cyber insurance policies to gain a comprehensive understanding of what exactly is covered – and what is not. Given the risk landscape, it is no wonder companies of all sizes continue to be subject to increasing data breach liability, both in the form of single plaintiff or class action lawsuits and regulatory investigations and proceedings. Plaintiffs in data breach class actions typically allege that businesses failed to adequately safeguard consumer information and gave insufficient and untimely notice of the breach.
Companies affected by a Cyber breach may also face liability to third parties, which may result in defense costs, settlements, judgments and, sometimes punitive damages.


It seems that every hour emerging innovations and dynamic social platforms open the threshold of new opportunities to share and attain information. When it comes to social media engines, when did people become the mindless machines pumping out sensitive information? Think of other websites you frequently utilize that require passwords and personal details.
We select these Q&As to safeguard our personal accounts, but overlook other platforms we might have shared this information on previously. The Internet of everything is so interconnected these days that it seems routine to grant access from one outlet to the other. Additional recent hacks include video gaming site Twitch, toymaker VTech and the latest, open source tool Socat. Marc Berger’s opening statements emphasized the extent of the cybersecurity threat currently facing firms across a wide swath of industries. Where there is reliance on third-party service providers, the AAM is NOT relieved of its cybersecurity risks but rather, has the obligation to assess and monitor the provider’s security policies and procedures and conduct adequate due diligence. While the SEC has issued various Risk Alerts providing guidance on areas of focus, the guidance and rules are not prescriptive. Only 39% agree that their organization has ample resources to ensure all cybersecurity requirements are met.
Last year, cybersecurity took center stage across the investment community, and there is little doubt that it will continue to dominate in 2016. Previously a non-factor for hedge funds, marketing is now a critical element to any firm’s success. One trend that we noticed in 2015 that we may see extend into the New Year is the transition some hedge funds are making into the family office spectrum. The Securities and Exchange Commission took major strides to regulate investment firm cybersecurity practices in 2015, with the release of multiple guidance updates (Click for the September 2015 update). In December 2015, we participated in a Wells Fargo Prime Services cybersecurity event and the panelists outlined everything your hedge fund needs to know about the SEC’s security expectations. As referenced above, training is critical to showcasing cyber preparedness in today’s world.
One final article related to security hones in on the fifth bullet above – vendor management. New fund launches and emerging managers are always looking for tips to assist them in successfully creating their firms – and Hedge IT delivered in 2015. We love delivering new educational content to our loyal Hedge IT readers, but we also like to share new voices and invite our partners and colleagues across the investment industry to share their expertise. We live in a world dominated by social media outlets, yet LinkedIn has emerged as the de facto professional site for industry networking and information sharing. The April 2015 SEC Cybersecurity Guidance Update goes deeper into risk assessments expectations. You must also understand where your data is located, how it is collected and who and what technology systems have access to it.
Registered investment advisers should have a clear understanding of the threat landscape, including potential internal and external risks as well as unique vulnerabilities specific to the firm.
But, how many are actually prepared to manage a corporate disaster efficiently is the matter of concern.
Nevertheless, preventing data stored on cloud from collapsing or getting crashed is more important than managing the already collapsed one. Therefore, preparedness for such things should always be there no matter how secure or well protected your cloud is.
If your disaster recovery doesn’t cater to the basic requirements at the time a cloud collapses, it means the plan lacks efficient tools that enable data to restore quickly. Prior to the economic downfall in 2008 and high-profile investment scandals made infamous by Bernard Madoff and others, hedge fund due diligence was viewed as an unnecessary assignment. They figured there would never be a shortage of investors, so there wasn’t a need to spend extra time satisfying their needs. In the past, the responsibilities associated with hedge fund due diligence would often fall under the role of a CFO, CCO or other executive – someone who had very little time to devote specifically to due diligence. There has, undoubtedly, been a significant increase in the number of due diligence inquiries by hedge fund investors, and the questions they are asking are much more relevant and involved - that rings true across business and operations functions, technology departments and the investment side of the business.
They want more information, more transparency and more assurances that fund managers have done their own due diligence in assembling and managing their infrastructure and overall businesses. Small-scale disasters, such as winter weather scenarios, and larger incidents like the Madoff scandal have initiated a real shift in the hedge fund industry and highlighted the need for hedge funds to have robust technology solutions in place and systems and procedures to keep them operational at all times. During the due diligence process, they often ask to see systems at work, the processes through which data is transmitted and stored, and how testing procedures work. Explain the designs and processes of your operations, particularly when it comes to your technology. If you do not have an in-house IT staff, you can ask your technology service provider to do this for you.
You will score points with investors if you are up front about everything and don’t attempt to hide anything. Hire a consultant to help you with this – it is the single easiest way to prepare for a real investor review. Test your disaster recovery system frequently (at least twice annually), and show the results to investors.
Investors want to see that funds are serious and that they value operations and technology as vital aspects to their businesses.
It does not begin when an investor comes in for a meeting and end when they walk out the door.
That can be everything from a definition of personally identifiable information (PII), a description of user access privileges and roles, or policies regarding USB thumb-drives.
It commits to defining and following thoughtful, far-ranging policies to eliminate the needless internal vulnerabilities that often go unrecognized. Not only must emerging managers evaluate traditional deployment strategies, but consider current factors influencing the financial landscape. There was quite a bit of content discussed during the 1-hour event, so we’ve pulled out some key takeaways. Target those who have a history of being receptive to founder share class and who may offer lower management and performance fees. Recognize where the private cloud has an edge: high-touch, industry-specific service and support, scalability and application integration, and security and compliance. Value is derived from knowledge of the application, knowledge of business, and having a dedicated support team.
The NFA's Interpretive Notice to NFA Compliance Rules 2-9, 2-36 and 2-49 entitled Information Systems Security Programs requires Member firms to adopt and enforce written policies and procedures to secure customer data and access to their electronic systems. Executive-level participation and annual review of the information security program is expected. NFA expects to devote appropriate resources, such as providing additional guidance, to assist Members as they develop and implement their ISSPs.
Don't forget to visit Hedge IT on Thursday as we reveal the last of our key considerations for starting a hedge fund.
Hedge funds, private equity firms and registered investment advisers now operate in a world where they are beholden to regulatory bodies with growing expectations and requirements. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which redefined the registration requirements for hedge funds, also set forth new reporting requirements and standards for safeguards.
With the prevalence of cyber threats and attacks, the SEC’s Office of Compliance and Examinations (OCIE) has incorporated cybersecurity into its examination targets. Firms can add users nearly instantly – a welcome benefit for startups looking to ramp up quickly. You can do this by conducting employee awareness training to keep all users informed and educated about the cyber environment and the threats that may arise. And be sure to come back to Hedge IT later this week when we'll be sharing an excerpt from our brand new whitepaper on the same topic! For example, what exactly will your employees need to fulfill their functions remotely and are they trained to do so? Therefore, if the storm seems to be impassable it is best to allow employees to work remotely. In the United States, seasonal precipitation impacts are generally opposite those of El Niño.
In addition to providing employees with security best practices they should follow, don’t forget to also include a list of actions they should not. Over the past few years, as regulations have changed and investors increasingly seek transparency, hedge funds are spending more time than ever preparing for the due diligence process. As this trend continues, investors are raising their expectations and looking towards hedge funds that display the highest levels in operational excellence. One major area of focus is the hedge fund’s IT and accompanying cybersecurity policies and procedures.
Are steps being taken to ensure visitors do not have the ability to observe or access sensitive employee systems and documents? Have appropriate training and documentation been established and shared with all personnel?
In addition to the IT infrastructure, it covers people, facilities, workplaces, equipment, business processes, and more.
High availability can be implemented into a firm's IT infrastructure by reducing any single points of failure using redundant components.
In working on the Eze Disaster Recovery team, I have heard a variety of reasons from clients as to why this is the case.
Current technologies allow IT providers to overcome just about any objection users may have with regards to DR testing. We often find that firms grow, evolve, and change their production environments as they develop and expand their businesses. At Eze Castle, we typically recommend that users think about their daily workflow when testing to help ensure all critical applications and data are available in the event of an outage. Typically, DR solution agreements will include regular testing as part of the service package, and we strongly recommend all firms take advantage of this component.
However, the reality is that many disaster recovery solutions (including Eze Castle’s!) can be tested in a manner that avoids any disruption to the production environment.
Even just a few moments of downtime could be extremely costly, so it is essential that firms implement sound business continuity procedures. To this end, Lisa Smith - one of our certified business continuity professionals - and her team recently conducted a BCP table top exercise with our management team here at Eze Castle. Read our complete Manager's Guide to DR and BCP for a comprehensive overview on hedge fund business continuty best practices. Scenarios may include a regional electricity outage, building fire, terrorist attack, violent storm, or the like.
The group should identify realistic and unrealistic expectations and work together to bridge any gaps between leadership and the established BCP plans. BCP table top exercises are conducted to provide an example of how the management team would work together to get the organization through a disaster. Additionally, having each other’s contact information can be extremely helpful during regular business hours, as well as, off-hours or holidays and weekends.
Depending on the type and severity of an emergency, facility management may choose to utilize passive notification, such as email, or they may use more aggressive notification like public announcement (PA) systems or alarms. If the building is closed, and the notification doesn’t reach the appropriate people, then employees may show up for work, wasting employee time and causing frustration. Although this review may not lead to any updates or changes to documentation, it’s important to ensure protocols are understood, notification plans are clear and information is accurate.
The day to day process of business can be an arduous task involving many resources, and does not often allow those involved to step back and see the big picture of what could happen in a worst case scenario. For a small business, having a dedicated person or team maybe beyond your budget, but it is equally important that you have a contingency plan in place if the unexpected happens.
The first step is to identify what data is important to your business, where it is stored, how it is accessed and how it is backed up. Decide who will be responsible for managing the backups or if you choose to out-source this, then ensure that you are receiving reports. Phishing is a psychological attack used by cyber criminals in order to trick you into giving up personal information or taking action. If the email appears to be from a legitimate organization but the address is a personal account (Gmail, MSN, Hotmail, Yahoo) it is probably an attack. If your friend or colleague sends you a strange message, their account may have been attacked. APT intrusions are often focused on high-value information and sectors such as the financial industry. In a spear phishing incident, criminals target specific companies or individuals and conduct background research to compile employee names, titles and contact information. Regulatory agencies and investors now expect businesses to have backup solutions and comprehensive record-keeping practices. In addition, international regulators such as the FCA, a financial regulatory body in the United Kingdom, are also demanding firms to have a data backup solution. From hardware failure, software corruption, virus or network security breaches, to natural disasters and human error, the threat to your data is endless.
Businesses that demonstrate that their data is secure and backed up have a competitive edge when security questions inevitably come their way. And by 2017, seventy-five percent (75%) of organizations will have replaced their remote-office tape backup with a disk-based backup solution that incorporates replication, up from forty-five percent (45%) today. A SMB Disaster Preparedness Survey by Symantec found that downtime costs small businesses an average of approximately $12,500 per day and medium businesses $23,000 per day. Eze Castle partners with KeepItSafe, a leading provider for managed online backup and recovery, to deliver our Eze Vault services. As hackers become savvier and cyber schemes more elaborate, many firms are relying on cyber liability policies to add an extra layer of protection. Governments are facing an unprecedented level of Cyber attacks and threats with the potential to undermine national security and critical infrastructure. Negligence, breach of fiduciary duty and breach of contract are just some of the allegations that a company may face as a result of a systems failure or lax security that compromises the security of customers’ personal information or data. Companies may also face class actions from banks and credit unions seeking damages for administrative expenses, lost interest, transaction fees and lost customers. For example, 25 class action lawsuits were settled in the wake of a retailer’s 2007 data breach involving the theft of data related to over 45 million credit and debit cards.
Third parties bringing lawsuits against businesses for damages are increasingly seeking to expand the nature of injuries and remedies sought in light of early case law which determined that there was no injury in fact sustained by the Cyber breach and thus no standing to sue.
The enactment of ITERA and the growing recognition in the business community that time spent repairing credit may constitute an injury in fact, may create an increased willingness of courts to find consumer standing to bring such actions and thus an increased liability risk to businesses. Typical data requested from social sites may include your full name, age, sex, birthday, relatives, photos, account access, etc.
Conceivably, if you scroll through your status updates and photos on Facebook you could find all of these personal facts.
So routine in fact that cybercriminals have realized the window of opportunity presented by these information gold mines.
The latter was announced earlier this week in a security advisory warning of a crypto weakness so severe that it may have been intentionally created to provide criminals a furtive means to eavesdrop on protected communications. Rather than being like Bill, we need to be more aware of the automaticity of our behaviors and tendency to trust sites while browsing the web. As a result, firms are challenged to understand what level of cybersecurity readiness will be deemed sufficient to meet regulatory obligations given their AUM.
According to the Ponemon Institute’s 2015 Global Megatrends in Cybersecurity, sponsored by Raytheon, 25% of respondents in a study say C-level executives currently view cybersecurity as a competitive advantage, versus 59% who say it will be a competitive advantage three years from now. In an industry historically known for protecting its information, recent regulatory developments may foster a change in how firms think about sharing information.
Across the hedge fund and alternative investment industry, firms are devising new strategies and implementing plans to drive growth and increase returns.
If we can assume that firms used 2015 to shore up security practices and have, at minimum, established a baseline for protecting firm assets with firewalls, password protections and penetration testing, we can expect 2016 to take cyber preparedness to the next level in the form of advanced features and analytics including phishing and social engineering tests, designed to increase the level of preparedness held by firm employees. In 2016, hedge funds and investment firms will need to develop comprehensive marketing strategies in order to elevate their brands, attract new investors and retain capital. Several prominent former hedge fund managers returned outside money in recent years and began operating as family office firms, most notably Steve Cohen and George Soros. Instances of social engineering are often what trip up employees – think phishing and spear-phishing schemes. Anytime an investment firm works with a third-party provider, it’s important to understand what risks become present and how firms can manage said risks.
Our two-part Checklist for Launching a Hedge Fund in 2015 shared insights from both Eze Castle Integration and our partners at Marcum LLP on the legal, technology and cybersecurity priorities for new hedge fund startups. Our August 2015 Hedge Fund Insiders Series featured fresh articles from contributors including Haynes and Boone LLP, Wells Fargo Prime Services, and Willis Group Holdings Ltd.
Even hedge fund managers, traditionally very secretive, are joining LinkedIn, so we outlined a few tips to ensure LinkedIn activity is top notch.
During the discussion, Stuart Levi of Skadden reminded attendees that the SEC has clearly defined (and communicated) its cybersecurity expectations. For this, the disaster management IT professionals initiate their work on the basis of four fundamental principles. If you are prepared for the worst, chances of restoring everything back and running operations smoothly increase gradually.
Step 4: RecoveryEnd result of a disaster recovery plan is that it should be able to restore everything at the earliest without any hassle. But as the hedge fund industry has evolved over the last several years, so has the need and desire for operational excellence.


You can also compile a comprehensive presentation or simply have an open question and answer session with your potential investors. Due diligence is an ongoing process that can continue to improve and evolve as investors and fund managers open the lines of communication and maintain an open dialogue. The bank believes hackers executed a hack that allowed $81 million to be taken from the bank’s foreign exchange account at the Federal Reserve Bank of New York. And the way that starts to happen is through systemic and comprehensive training practices.
Prepare an institutional set of documents up front if you are looking to attract institutional money versus high net money. They include risk assessment, governance, training, access control, vendor management, and information sharing.
Additionally, firms must provide employees training during the onboarding processes as well as periodically during employment. For example, system safeguards such as data protection, disaster recovery measures and email archiving are requirements under Dodd-Frank. Having released two extensive questionnaires and several risk alerts focused on security, the SEC has made it clear to investment firms that they will be investigating the practices employed at firms and increasing expectations for the future.
Startups have a variety of options when it comes to settling on their technology infrastructure.
Users can gain access to email, file services and applications from virtually anywhere, and built-in disaster recovery provides confidence that everything is protected from the inside out. Users should understand how security threats may present themselves (phishing schemes, social engineering, etc.) as well as how they can become cybersecurity assets to your firm. Successfully operating a new startup beyond the first year is a feat many managers struggle to accomplish, therefore it's critical for emerging managers to gain a full understanding of the industry that awaits them and the hurdles they should expect to face. With these unprecedented levels of snow, New York City was forced to halt public transportation and implemented a mandatory restriction on private transportation as well. One must also consider licensing, infrastructure, security, and employee comfort as working from home will be a change for them.
If essential functions are unable to meet their workload demands from home, then temporary office space with redundant power is always an option. It is always important to review your business continuity plan and make sure employees are aware of their roles if an issue were to occur. In the coming months, there is expected precipitation in Southern California, extending along the South coast. In today's landscape, however, investors and regulators alike expect and demand that firms implement preparedness plans for disasters and cyber-attacks.
Take a look below and discover a vast range of security tips and tricks from email encryption to proper security measures for protecting computers and mobile devices.
One important way to ensure your firm meets these high standards is to complete a due diligence questionnaire (DDQ) that can be shared with potential investors.
At Eze Castle, we frequently assist our hedge fund clients in completing DDQ questions on technology, and we often see the same types of questions popping up. In addition, a great resource for conducting due diligence on a hedge fund's service providers is the 200 question document published by the Alternative Investment Technology Executives Club (AITEC).
Be sure to read our articles on the difference between DR & BCP and preparing for a worst case scenario. Additionally, we are hearing from a growing number of hedge fund clients whose investors now require them to test their DR solutions and report on the results from those tests.
In turn, the DR site needs to evolve and change simultaneously in order to continuously meet business requirements.
Results should be documented and provided back to your DR provider so that they can assist you with resolving any issues that may have arisen during the course of the test.
Regular testing helps to capture the ever-changing requirements of a business, so that gaps or issues can be addressed in advance of a disaster.
After this successful meeting, we thought it would be valuable to share some insights on the BCP table top exercise process with our readers to spotlight the importance of this activity. The group covers all of the actions necessary to ensure employees are safe and accounted for and the business can continue to operate. Be sure to hash out all of the details of the scenario, including a hypothetical date and time, an assessment of the immediate impact of the event and how employees are being affected.
While alarms and PAs might help grab the attention of tenants, they aren’t the most effective tools to communicate long or detailed messages. Failing to evaluate these plans could lead to confusion, tarnished reputations and more serious damages following an incident. The major steps are all presented and are filled in with a sampling of some of the minor processes and functions that the disaster planning team feel would be appropriate.
For members of a Disaster Recovery Team,  it is vitally important to the company that someone should have this big picture what if point of view.
Your Insurance will pay out for some capital items, but this will take time, how will you keep your customers, suppliers and employees in the meantime? Test regularly that your data can be recovered and that your plan is reviewed to ensure that new data is being managed.
Jon William Toigo presents step-by-step coverage of disaster recovery techniques that reflect the latest technologies in data storage, networks, server systems, and the Internet. Oftentimes the email domain will be missing a letter or have letters reversed, so you'll have to pay close attention. Also, hover your mouse over the link before you proceed to make sure that it is taking you where it claims to.
Understanding the need and importance of implementing a backup solution can add instrumental value to your business.
With today’s financial services companies managing exponentially growing volumes of sensitive data, the risk of loss grows as well.
If something were to happen to the data center where your production system lives, you can resume operations in DR. Having a third-party backup solution provides geographic diversity of data assets, which is key for a complete business strategy. Recently, KeepItSafe highlighted the success of a backup and recovery case when a company’s servers crashed, and with it, so too did their records of billing history, accounts receivable and accounts payable. Similarly, businesses across a wide range of industry sectors, particularly those in the health care, retail and financial services industries1, are exposed to potentially enormous liability and costs as a result of Cyber incidents and data breaches. Increased regulation at federal and state levels related to information security and breach notification is expanding the legal avenues that may be pursued. Behavior quizzes offer entertainment to discover your celebrity and fairytale doppelgängers, or breakfast food and ice cream personality matches. These sources generally ask us challenge questions as an additional level of security, such as, the make of our first car, hometown city, high school mascot or nickname.
Criminals began creating faux, malicious versions of the app that asked users to sign into Facebook to generate their personal meme. Highlighting the importance of information sharing, on December 19, 2015, after years of failing to enact cyber threat information-sharing legislation, Congress passed the controversial Cybersecurity Information-Sharing Act of 2015. In 2016, we expect the following industry trends will play a role in shaping many of the decisions hedge funds and other investment management firms make.
With cyber-attacks increasing in sophistication, firms will need to spend time in 2016 working with managed providers and internal IT teams to continue the education process and identify strategies to outsmart hackers. Whether via traditional marketing campaign tactics such as pitch presentations, websites and CRM systems or more modern avenues such as social media, firms would be wise to think through their objectives, plans, and communication methods before outreaching to potential investors. And while there are less regulatory pressures and expectations to meet as a family office entity, security measures should remain enterprise-level, and we expect to see family offices investing heavily in cyber preparedness policies and systems. He recapped the following six areas advisers must have covered to demonstrate preparedness to regulators.
Monitoring, thus, is an important part of the cloud managementthat helps to prevent cloud from falling into the trap of disaster. All the transactions that were made related to selling bottles were stored in accounting software and were managed by the professional accountants.
Hedge funds should continue to take the time to understand where the real risks are within their businesses and work to instill confidence with their investors. It appears that the initial point of entry for the hackers was a spear-phishing email, potentially sent weeks before the fraud took place, which allowed the criminals time to remotely monitor and probe the bank’s networks without detection. Regardless of the assets your firm is launching with, you will be expected to have sophisticated and comprehensive policies and procedures in place from day one to combat cyber threats. With the birth of cloud technology, firms can save on upfront capital expenditures and host their infrastructure in the cloud – providing flexibility within those startup budgets. A reputable cloud services provider not only provides world-class infrastructure and resiliency; it also assumes responsibility for the management and daily maintenance of your cloud environment. Investors also have high expectations, and before they will even consider allocating money to your firm, they want to understand what protections you’ve put in place to protect their assets. Jonas proved to be kind in the fact that the majority of the impact fell on the weekend but many firms can recall more disruptive storms occurring during regular business hours leaving many employees feeling stranded.
Temperatures are also expected to be warmer than average for most of the Northern parts of the country - a welcome gift for places like New York, Philadelphia and Washington, D.C. This trend is putting more pressure on firms to participate in regular testing than ever before.
By regularly testing their DR sites, firms can ensure all of these needs are met and they will be fully prepared to continue operations should a disaster occur.
This requires less coordination with user groups, and therefore has minimal impact on the firm’s daily operations. They also serve as a reminder that these events can happen at any time and often occur rapidly and without warning.
Typically, that is where the relationship ends, and if so, that can potentially lead to some issues in the future. Even planned drills, such as fire drills during regular business hours, are not fool-proof. What is the point in investing so much time and resource in our company if it could all be turned upside down in an instant by something as simple and commonplace as a summer wildfire? In the case of an Internet Service, ensure you include in your plan, what would happen if a 3rd party had a disaster or if your Internet connection was lost. Obtaining such details and observing communications provides criminals with the tools to mirror email addresses, website URLs and dialect. However, if something is deleted in the production environment, that action is typically mirrored, thus deleted in DR as well.
DR allows the rapid recovery of IT operations while cloud backups provide another layer of protection by leveraging a third-party vendor to secure your data in an alternative location. More recently, in 2014, two major retailers reported that the total costs of data breach and related class action lawsuits (less expected insurance recovery) was estimated at $63 million and $191 million, respectively. In 2014, the agency issued a press release announcing its 50th Data Security Settlement on behalf of consumers. To partake in this social extravaganza, we hand over our personal information freely, forgetting its value somewhere between each hashtag and viral post. Through the app, users may customize their characters by simply providing their first name and gender on the Blobla website. Once the criminals were logged in, they stole account details and infected computers with spyware, viruses and malware.
In this tug-of-war of security and connectivity, users can regain control of their personal information.
As of June 30, 2015, per ITRC data, in 2015 the banking industry experienced an increase of 85% versus 2014 data for the same period.
However, regulators may also be looking at whether enforcement action is warranted if the AAM failed to implement appropriate security measures that would have prevented the attack from occurring. If these four factors are worked upon and brought together in sync keeping all the vital aspects of managing each one them individually in mind, the experts working towards it are supposed to achieve goal. But, the size of these transactions was so huge that was becoming difficult for the company to store it in their in-house servers.
Disaster recovery, business continuity planning and cybersecurity preparedness should all be viewed as full business exercises, not solely technology ones.
Be sure to enable your firm’s processes to comply with SEC recommendations including risk assessments, infrastructure practices, policy documentation, etc. With hackers savvier than ever and financial firms as known targets, it’s critical that firms establish a comprehensive approach to security to not only meet investor and regulatory demands but also to protect firm assets and mitigate business risk. To alleviate the stress incurred during winter storms, we sat down with our own Business Continuity Analyst, Matt Donahue, who creates, writes, and audits hedge fund’s business continuity plans.
As far as specific remote access technologies, Matt recommends Virtual Private Networks (VPN), Citrix or Outlook Web Access (OWA), depending on a user’s specific needs.
These tests do not need to be elaborate, for example, a work from home day or a call tree run through might suffice. During this commotion, it may be difficult to locate members of building management and even harder to efficiently communicate. When disaster strikes, it creates a new dynamic for the business and all involved to respond to. A complete and functioning Disaster Recovery Plan is a company’s best assurance of continued survival. Once a disaster hits your business, it is too late to start thinking about answers to these questions. Phishing now refers to any message-based attack, whether that be email, IM, or on a social media network.
The end result is the criminal’s identity masqueraded as a legitimate, trustworthy source. Backups, on the other hand, create an offline copy of your data which is not accessible except to restore, sometimes utilizing a third-party vendor to store that data in an alternate location. The importance of protecting this data is interconnected to the importance of the overall operations of the business. And, this year, two major health care companies are separately facing several lawsuits as a result of data breaches that reportedly exposed the personal records of 80 million and 11 million people, respectively.
One of those settlements involved the much publicized 2006 settlement with a data aggregation company wherein the company agreed to pay $10 million in civil penalties and $5 million in consumer redress for time customers may have spent to monitor and repair their credit following a breach that exposed their personal information. Federal laws, such as the Health Insurance Portability and Accountability Act, the Gramm-Leach-Bliley Act and the Fair Credit Reporting Act, have requirements to safeguard the privacy of personal information, and some states require notification to the state attorney general. Instead of dispensing reams of sensitive data, choose to keep what’s private, private. Firms can no longer act in silos, but must share information with industry peers (including competitors) to protect the entire sector.
Now, if we look at the other side picture of it, although, most of the companies are aware of such a plan, there are still others that are lagging behind.
If not forthcoming, you may open up your firm to serious regulatory and criminal prosecution.
Your cloud services provider should act as your trusted technology adviser and, as such, give you the flexibility and time you need to focus on your investment priorities without worrying about security updates and patch controls. Matt spoke with us about different BCP scenarios and provided tips to keep your firm operational during the worst of storms. In California - a state tortured with drought in recent years - rain might, at first, seem like a positive. The best way to respond to a new dynamic is to have a blueprint of what actions to take, and what people to involve.
If access to a file was lost in both production and DR, backups grant the ability to recover the data and continue business as usual. This is an example of a successful case; however, many businesses lacking a backup solution are not so lucky. While these matters have yet to be resolved, the anticipated costs of litigation and settlement may set records. Given this ever-evolving and regulatory landscape, companies should expect an increase in third-party liability claims led by federal regulatory agencies as evidenced by a March 2015 federal court decision involving a large hotel chain wherein the court held that the FTC has regulatory authority to enforce data security practices. Cyber-attacks carried out on the financial community have almost doubled in 2015, and industry experts believe these numbers will continue to increase unless adequate precautions and prevention measures are taken.
AAMs can expect to see investors placing greater emphasis on cybersecurity as a part of its due diligence and regulators focusing on cybersecurity in their routine regulatory exams. The ratio of organizations following and carrying out disaster recovery planning activities might be expanding at a faster pace, but a cent percent ratio is the need of the hour and current IT scenario. Why private cloud, because financial data is highly confidential and thus, cannot be shared with the third parties. To come back on the four points on disaster management discussed above, let us elaborate them for better understanding them individually. Typically, drought conditions impact vegetation and other natural defenses that hold surface soil and sediment in place, meaning floods and landslides could develop with heavy rains. Disaster recovery planning teams need to plan to survive various types of disaster while keeping the business intact and profitable.
Now, after the company migrated the data on private cloud they were able to get relief from the excess load of transactions, which their servers were not able to handle. To add more to their misery, the company didn’t even have any disaster recovery or data backup plan for restoring it.
Why, because they thought that their cloud infrastructure was well monitored and so it didn’t require any extra monitoring.
But, had the company been more cautious about taking data backup and planning a proper disaster recovery plan, the state of the company would have been better. Not only, did it suffer monetary losses, but a lot of time was consumed and at the same time there was a huge loss of reputation in the market as well.



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