Cybersecurity drives digital transformation in alternative investment institutions

As the alternative investment industry grapples with a rapidly changing threat environment, increased regulation and a continued need for innovation, most firms are increasing their DX and security budgets and citing security as critical to their DX initiatives, according to IDC.

Senior executives from 400 global alternative investment institutions in the US, Canada, France, the UK and Germany were surveyed to understand the current state of digital transformation and cybersecurity, identify key barriers and benefits of a coherent strategy, and explore the growing role of advisory services as strategic partners.

Investments in cybersecurity and digital transformation rise, but in-house execution declines as outsourcing trends increase

89% of institutions surveyed are increasing their digital transformation and security budget in 2022 compared to 2021, and nearly half (48%) are increasing spending by at least 10 percent. The survey results also show that institutions are increasingly using consulting services and managed service providers to support the implementation and management of initiatives.

  • Nearly 30% of institutions plan to heavily outsource to managed service providers in the next two years, more than doubling current usage (12%)
  • 51% of respondents will either heavily outsource to MSSPs or use a combination of MSSPs and managed threat detection and response providers in the next two years
  • In addition to working on specific projects, 67% of respondents cited staff growth as the main reason for using consulting services

Cybersecurity is a driving force for digital transformation

57% of respondents identified security/privacy as a top concern for implementing digital transformation, and 35% listed policy development and investigations as a top concern as well, but still:

  • 61% have undertaken security-focused digital transformation projects in 2021
  • 47% indicate that risk assessment management is also a top priority for their digital transformation efforts, and
  • 42% rank security strategy and road planning as a priority

“What these findings show is that the alternative investment market recognizes the value of combining digital transformation and cybersecurity strategies, and firms are willing to invest in such efforts, but struggle to execute due to obstacles beyond their control, such as a lack of staff,” said David Andrade, ECI CEO. “This presents a huge opportunity for third-party providers, such as consulting firms and managed service providers, to enter into a more strategic partnership with these institutions and help deliver lasting change.”

Institutions need external expertise for time-consuming processes and emerging technologies

Monitoring, alerting and responding to threats is a time-consuming activity requiring specially qualified and trained personnel; however, given industry-wide skills shortages, institutions are exploring vendor-managed security solutions as a more cost-effective approach that allows internal teams to focus on routine business and digital transformation efforts.

  • 80% of institutions in North America and 81% in Europe indicate that cybersecurity consulting services are critical to digital transformation efforts
  • Cybersecurity attributes most commonly outsourced include Security Operations Center (SOC) presence and management (51%) and advanced threat detection technology (50%)
  • 44% of respondents indicate that leveraging emerging tools and technologies is critical to enabling turnkey modernization in their enterprise

“Digital transformation initiatives with built-in cybersecurity are paramount to most industries because of the significant impact DX can have on a company’s profitability, growth and risk management,” said Philip Harris, Director, Cybersecurity Risk Management Services at IDC. “As security assumes a critical role, companies are turning to outsourced resources to both scale initiatives and build or maintain a strong security posture in the process.”

The survey results show that most institutions recognize the value of DX with built-in security and are actively investing in these projects. The use of external experts is a leading trend to ensure that organizations take full advantage of DX capabilities, and security is only growing in importance to these projects and the success of the organization.

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