Financial data is personal, highly sensitive, and valuable. That is why financial institutions have always been the primary target of cyber attacks. According to the statistics, there were more than 2500 global cyber attacks in the financial sector in 2021, the highest in the last ten years.
Apart from that, there were 1800 data compromises in the United States in 2022. The average cost of a breach was $4.35 million.
It is ironic that despite unprecedented development in cyber protection, digital crimes are increasing every year, especially in the financial sector. It is not just financial institutions at fault; they have less control over different factors, such as third-party contractors in their network. But, failing to implement best security practices and not investing in modern-day cyber protection solutions are common mistakes financial companies make.
Why is data privacy so important in the financial industry? How can technologies like virtual data rooms assist financial businesses in minimizing data thefts, and how can they tackle regulatory compliance challenges? Read on to get your answers.
Importance of privacy in the financial sector
What makes life difficult for financial companies is that they have to deal with internal and external threats. Yes, they can exercise more control over things like internal data protection.
However, things get a little out of hand due to the use of mobile applications, which are more prone to phishing attacks. Also, financial companies have to share private data with external parties for their day-to-day activities, which makes data more vulnerable to cyber-attacks.
The success of a financial business depends on how it can maintain a balance between sharing the sensitive personal information of its customers and protecting it from hackers. It is only possible by having an excellent data protection strategy in place.
The role of technology in digital data protection
Thanks to cloud technologies, data protection and management have become easier. The financial sector has been rapidly shifting to safer data management solutions like online data room software.
Online or virtual data rooms are cloud-based, centralized, and globally recognized data management solutions that allow any type of business to safely manage, store, share, distribute, and organize confidential and regularly-used information.
“How successful a financial institution is defined by the level of trust its customers have in it, and virtual data rooms can help build that trust” — says Terry Snyder, Co-Founder https://datarooms-review.com/.
Below is more on how online data room software can help the financial sector minimize those risks.
Centralized data management
As mentioned earlier, external or third parties often prove to be a weak link in the chain. They are more prone to cyberattacks, and even a strong internal digital protection system in financial institutions may fail. However, a centralized data storage system can be a great solution.
A central document system allows institutions to exercise more control over their private information. For example:
- Virtual data room software allows financial businesses to limit or customize access for third-party users. They can decide whether a third party should be allowed to edit, share, download, save, or copy documents or not. Businesses can remove suspicious devices and the data downloaded from the VDR without notifying the user.
- Company branches or offices will only access one platform to access data. The management will be able to control the internal flow of information by defining access levels and roles in the VDR.
- Activity tracker and audit logs help management keep an eye on all the activities performed by third parties and internal users. They can catch the culprit immediately.
Better protection for privileged accounts
Privileged accounts or individuals with access to highly sensitive information are the primary targets of cybercriminals. Management should pay more attention to protecting those accounts, and a digital data room can do it due to its strong entry barriers.
That said, VDRs employ features like Multi-factor authorization or two-step verification. These features make sure that only a registered user can log in after entering the correct details. If the management feels an account has been breached, they can remove any device from the VDR immediately and purge all data room-downloaded files immediately.
Virtual data rooms and regulatory compliance
The financial industry is regulated by various governing bodies, which require financial institutions to comply with local and international digital data management standards.
For example, FINRA (Financial Industry Regulatory Authority) regulates investment and brokerage firms and exchange markets in the US. Apart from that, GDPR, or General Data Protection Regulation, governs data privacy and integrity in the European Union.
What makes virtual data rooms a better data management solution is the compliance factor. That said, A-grade virtual data room vendors are mostly FINRA, FISMA, GDPR, and ISO-compliant, thus eliminating compliance challenges for financial businesses. Some of the best data room services for the financial sector include iDeals, Ansarada, DealRoom, and Intralinks.
Parting thoughts
Data protection, risk management, and regulatory compliance are the major concerns for the financial sector. Data management solutions like online data room software help the financial industry tackle the