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Financial services vulnerable to cyber incidents

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Financial services vulnerable to cyber incidents
Nobuhle Nkosi Head of Financial Lines at AGCS Africa.

The Allianz Risk Barometer 2018 has revealed that cyber incidents are a top concern for the financial services industry with 51% of responses from risk experts within the sector. Changes in legislation and regulation with 28% of responses are second, up from third in 2017. Business interruption and new technologies are fairly new risks in the sector in third and fourth position respectively. The report published annually by Allianz Global Corporate & Specialty (AGCS) surveyed 1,911 risk experts from 80 countries.

Business disruptions, which arose as a result of cyber incidents, are a major concern in the South African financial services sector. Online banking rose in tandem with cyber attacks on their networks. These attacks which can take the form of unauthorized access or presentation of malicious software on a company’s system may lead to a significant loss of data, and the unavailability or control of IT systems.

“Cyber incidents aren’t just caused by hackers. Technical failure or malicious or innocent employee action is often to blame. Whatever the cause, reputational damage is irrevocably linked,” said Nobuhle Nkosi Head of Financial Lines at AGCS Africa.

Changes in legislation and regulation – The regulatory landscape in South Africa is dynamic. The financial services sector recently adopted the new Twin Peaks law whose objectives are derived from lessons learned in the 2008 global financial crisis. South African financial services providers are now regulated by a Prudential Authority housed within the Reserve Bank and a Financial Sector Conduct Authority. This legislation has brought changes to some products provided by financial service providers with overall price risks and profit implications.

Market developments – while there are not many new entrants in the South Africa financial services sector due to stern licensing regulations, innovation and market stagnation are a cause for concern in the sector. According to the Allianz Risk Barometer, the risk reduced from number to  41% in 2017 to 28% which is an indication that firms operating within the financial services sector are adapting to risks rooted in market developments.

Unlike the retail and manufacturing firms that are heavily burdened by business interruption from supply chain disruption, business interruption at 27% is a new threat to financial service providers. The risk from new technologies at 23% is also new to the sector with less impact anticipated.

Edited by Fundisiwe Maseko
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