Financial Crime Could be Spoiler to Digital Revolution

May 14 , 2022
By Asseged G. Medhin

The integration between banking institutions and the telecom sector has become a strategic imperative and a matter of survival. But the challenge of cyber crime is not being given due attention, writes Asseged Gebremedhin, an insurance professional with over a decade of experience in finance.

As much as digital is a welcome addition to businesses, it has created even greater uncertainty. It demands business leaders make innovation a top strategic priority, and if they want to achieve their target, they should have an open appetite to challenge cyber risks. The financial sector is in more liquid form and is especially exposed to the risks of disruption. The more it is digitalised, the more it would be exposed to technological risk in the form of financial crime.

Most bankers and insurers want to make their services manageable by the standards and expectations of their customers – smooth, seamless and endlessly accessible. This drive has led them to push for digitisation, which has provided a boon to their business, but also left them open to cyber attacks and financial crimes. Such risks are becoming a major concern for boards of directors, management, and executives. Due to the delay in securing the system, intangible factors such as liquid assets and client information are ever more accessible to criminals.

Recently, the integration between banking institutions and the telecom sector has become a strategic imperative and a matter of survival. This is to be encouraged further, but the challenge of exponential financial crime is not being given due attention.

The knowledge and awareness of navigating digital uncertainty will be the biggest and the most demanding job in managing financial crime. Thus, the position of IT specialists is integrated and strongly weighs on the leadership direction of the CEO and the governing capability of the board directors. Managing technological risk will give confidence not only to the company’s leaders but also end users who have put much trust in institutions and the shareholders that have put their faith in business leaders.

Financial risk is exponential because of its nature of shortness, the digital life span of a given IT system. Since companies incur huge costs in case of a successful attack, it will eat into their return on investment indicator. Digitalised businesses are continually built up on technology with a shorter life span, urging companies to put their eyes on cyber-attacks and financial crimes. The case is more severe in banking, insurance and telecom services.

Cyber attackers can gain access to valuable information, such as credit card numbers, client personal identification numbers, login credentials and government-issued identifiers. Weak security infrastructures are susceptible to hacking attacks. In addition to financial losses that can result from a data breach, providers’ reputations and customers’ trust will be bulldozed.

Criminals can access sensitive customer information, such as account types and last transactions, which allows them to pass as legitimate customers and apply for loans in someone else’s name. To protect against data breaches, IT departments need to regularly update their systems and software, patch their systems and use strong encryption.

The financial sector should continue developing capabilities for detecting incidents when they occur, minimising the impact on business and critical infrastructure, and tying these capabilities together in a comprehensive framework. Threat actors are increasingly deploying a wider array of attack methods to stay one step ahead of financial firms. Criminal gangs and nation-states combine infiltrating techniques in their campaigns and increasingly leverage malicious insiders. At the moment, many financial services companies are struggling to achieve a level of cyber-risk maturity required to counter the evolving threats, according to Deloitte’s survey of global financial services executives.

The digital revolution has begun, and it cannot be rolled back. Businesses and institutions that will make use of it have the most excellent chance of sustainably growing. But cyber attacks pose a challenge that could wipe out any financial activity. Business leaders need to guard carefully against this risk.

PUBLISHED ON May 14,2022 [ VOL 23 , NO 1150]

Asseged G.Medhin, deputy CEO of Global Insurance Company.

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