The finance sector works closely with people’s wealth, making it a glowing target for cyber threats. Cybersecurity is no longer optional — protecting your clients, partners and business is necessary. Strengthening your cyber defenses begins with thoroughly investigating your current practices and infrastructure.
Risk Assessment Frameworks for Finance Companies
A cybersecurity framework is a set of rules and guidelines that help organizations like financial institutions reduce and handle cybersecurity threats. Using one during your risk assessment makes the process more efficient and easier to follow.
They also help align cybersecurity practices across multiple departments and third-party vendors, leading to a consistent approach to potential risks. One of the most widely used guidelines today is the National Institute of Standards and Technology Cybersecurity Framework 2.0, which the institute redesigned to suit all industries and organizations, including finance.
6 Steps to Conduct a Cyber Risk Assessment
The specifics of a cyber risk assessment can differ according to your chosen framework, but they often operate on similar security principles. Here are six steps for systematically evaluating your cybersecurity risk and posture.
1. Set Your Scope
Identify the extent of the assessment. Will you evaluate the entire brand or focus on specific departments? A wide evaluation will provide the most insight but will be more time- and resource-intensive. Consult key stakeholders to ensure they understand what the process entails.
2. Identify Your Assets
Once you’ve decided on a scope, map out all assets involved, their entry points and how they interact. Create an inventory of all IT assets, which includes data, software, hardware and networks. Then, classify your assets based on their value and importance to the enterprise. Critical assets will likely need more stringent protection.
3. Find Threats and Vulnerabilities
With your asset inventory on file, you can identify vulnerabilities or threats, such as weak passwords, outdated software or poorly configured firewalls. Resources like the National Vulnerability Database can be valuable for automating vulnerability management and ensuring compliance.
4. Evaluate Risk and Impact
Assess each identified risk or vulnerability, and determine how much of a threat it is to your business. Look at the types of assets these risks can target, as well as the potential cost of responding to these attacks. You can also consider the difficulty of recovery and the reputational harm that comes with a specific threat.
5. Develop Security Controls
It’s vital to identify essential security controls to strengthen your cyber defenses. Consider using a combination of the following types:
- Physical: These controls regulate physical access to your assets. Examples include vaults, biometric locks, security guards and CCTV.
- Technical: These controls use technology to mitigate risks, such as through firewalls, encryption and anti-malware programs.
- Administrative: This type covers policies, workflows and official procedures designed to handle risk and minimize damage to the entity.
6. Observe and Record Results
Continuously monitor the performance of your security controls and document the results. These notes allow you to assess your cybersecurity posture accurately and inform future risk assessments and security updates.
Why Your Financial Institution Needs a Cyber Risk Assessment
The average cost of a data breach in the financial sector reached $6.08 million in 2024, which was over $1 million higher than the global average across all industries. These massive economic and operational threats make it essential for finance companies to conduct a cyber risk assessment.
Identify Security Vulnerabilities
Ignorance can put your organization in danger, but a risk assessment makes you aware of weaknesses in your IT infrastructure and common threats in your industry. This knowledge helps you set up the proper protections and prioritize solutions most compatible with your needs.
Improve Long-Term Cost-Effectiveness
A cyber risk assessment will cost you some money. However, its ability to protect you from hackers and data breaches can save you much more. Protecting your business from such a breach saves you from spending large amounts to recover stolen data and potentially dealing with settlements or legal trouble.
In 2017, the credit bureau Equifax fell victim to a data breach that leaked sensitive details of over 150 million people due to a framework error that they failed to fix despite detection. As a result, it had to spend around $1.4 billion in settlements and compensation.
Gain Stakeholder Trust
Prioritizing cybersecurity by conducting regular risk assessments communicates your institution’s commitment to protecting the welfare of your clients, partners and other stakeholders. For instance, outlining clear privacy policies allows you to communicate your practices effectively and helps customers gain peace of mind when sharing their data with you.
Better Incident Response
Understanding cyber risks and protecting against them makes your institution more capable of responding to potential attacks. You can create response plans describing key roles and responsibilities to minimize the harm cybersecurity incidents cause and recover more easily.
Comply With Industry Regulations
Financial institutions must comply with federal and industry regulations governing data privacy and security, especially since they deal with sensitive client and stakeholder information. For example, U.S. banks must follow Federal Deposit Insurance Corporation guidelines on privacy, especially surrounding the act of sharing consumer information with third parties. Rules and security frameworks like these ensure a high level of care when dealing with private business or client data.
Strengthen Defenses Through Awareness
Cyber risk assessments are one part of a continuous effort to reduce and manage risk. They are essential for financial institutions, especially due to the sensitivity of the data involved. By adopting a reliable framework and ensuring cooperation between different stakeholders, your company can strengthen its security posture and keep up with new threats and changes in the industry.
