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Matthias Knab, Opalesque for New Managers: Cybercrime is no longer a theoretical risk for private equity - it's an operational and reputational minefield. As ransomware attacks and third-party breaches surge, investors can no longer afford to treat cybersecurity as just an IT concern.
A new white paper from Dynamo Software, Fortify & Defend: Cybersecurity Risk in Private Equity, provides a sobering view of today's threat landscape-and offers a practical roadmap for building resilience.
The Financial Fallout Is Real
- $10.5 trillion: Projected annual cost of cybercrime by 2025
- $5.2 million: Average ransomware demand in 2024
- 330%: Rise in data breaches in financial services since 2019
- $100 billion: Estimated annual losses in alternative investments
These translate into litigation, SEC fines, business disruption, and loss of investor confidence.
Why Private Equity Is a Prime Target
Private equity firms are attractive to attackers due to high-value assets, confidential LP data, and often weak or decentralized IT infrastructure. Growth-focused firms frequently overlook security best practices.
Real-World Examples
- A Canadian PE firm was breached via outdated third-party software, exposing client data and triggering lawsuits.
- A U.S. firm was hit by LockBit ransomware, leaking sensitive healthcare data and causing projected damages of over $35 million.
Platform-Based Defense: The New Standard
Dynamo Software advocates for integrated platforms with embedded cybersecurity, offering:
- Encrypted data-sharing via investor portals
- Real-time threat monitoring
- Zero-trust access controls
- Compliance with NIST, ISO, and SOC standards
A single platform reduces exposure created by fragmented third-party tech stacks.
Why LPs Must Pay Attention
Cybersecurity is no longer just the GP's problem. LPs should ask:
- How are you protecting investor data?
- Are your vendors secure?
- Are you aligned with global cybersecurity frameworks?
Due diligence should now include cyber readiness and digital risk management.
Investor Takeaways
- Cyber risk = financial risk. It impacts performance and trust.
- Demand transparency. Require disclosure of cyber policies and protocols.
- Favor integrated systems. Unified platforms reduce fragmentation risk.
- Push for standards. ISO and NIST alignment improves oversight.
Final Word
Cybersecurity is a fiduciary responsibility. Whether you're allocating capital, servicing or managing it, the burden is on you. Tools like Dynamo's platform help firms defend, comply-and retain investor confidence.
Download the white paper (click Source): Fortify & Defend: Cybersecurity Risk in Private Equity - by Dynamo Software.
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