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Experts are warning that as financial institutions rush to comply with the EU’s Markets in Financial Instruments Directive (MiFID) 1st November deadline, security risks are in danger of being overlooked, exposing firms to a range of potentially damaging new threats.
"MiFID implementation is complex, involving the coordination of resources across many departments in investment firms. Only a tiny number of firms look like they are on track to hit the 1st November deadline, while the vast majority face a range of challenges over the coming months in their journey to compliance. But as firms get to grips with identifying and storing the vast amounts of information required by MiFID, they need to be mindful that it will expose existing flaws in their security, as well as introduce new threats that they will now have to manage. Research suggests that the cost of MiFID IT implementation, in the UK alone, is set to surpass £1 billion, with typical UK investment banks spending upwards of £10 million each.” commented Phil Higgins, executive partner at Brookcourt Solutions.
Security issues include the following:
1. The importance of building security into record keeping processes – ensuring the long-term integrity and security of records.
2. There are new risk drivers, which are increasing existing risk and introducing new internal and external risks.
3. Technical solutions exist to many of the security risks that MiFID will introduce – the challenge is getting everything to work together.
4. Some firms have already invested heavily in security solutions and there is an opportunity to repurpose and re-use.
5. There needs to be a change in mindset inside firms – many of the new risks come from ‘soft’ factors such as people’s behaviour and attitude.
6. Policy management and identity management will be key challenges.
7. Timeliness – the ability to detect intrusions or anomalous behaviour quickly - offers major advantages.
Firms that do not tackle security issues raised by MiFID will substantially raise their risk profile and leave themselves open to both reputational damage and legal action.
•Date: 4th May 2007 • Region: Various •Type: Article •Topic: Financial sector
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