Financial Security Definition
Financial Security defines any form of financial instrument or certificate that has economic value and can be traded. In general, securities represent an investment and a source by which companies and commercial enterprises can raise new capital. Securities are classified broadly into three categories namely, debt securities, equity securities, and derivatives. An entity or a company issuing security is referred to as the issuer, and those that buy the security are known as investors. Financial security is an ownership position in a corporation that is publically traded via sock, a corporation that owns the entity’s bond or a creditor relationship with a corporation or a government, or rights to ownership as embodied by an option.
This can also be referred to as bonds, deposits, debentures, commercial papers or notes, based on their collateral, maturity and other factors. Debt securities are normally issued for a predetermined term and at the end of that term, the issuer can redeem it.
The investment in stock issued by a company is referred to as equity security. In simpler words, it refers to the ownership position which is called ‘equity’ in a corporation. Equity security also represents a claim on its proportional share in the corporation's profits and assets.
This is a contract that obtains or derives its value from the performance of an underlying entity. This contract is often simply called ’underlying’ and can be an asset, interest rate or index. A few of the general derivates are futures, forwards, swaps, options and so on.
At present, all businesses face escalating cybersecurity risks, but financial institutions in particular have become the target of attacks, owing to lacking security protocols and legacy infrastructure. While a large number of banking services occur online to offer increased access and convenience to customers, it has also led to higher security risks. Banks are increasingly prone to various types of cyber threats from attackers that include insiders, third parties, and hackers. This is because banks possess huge quantities of highly sensitive data, which if compromised could have dire consequences, in terms of reputation and significant monetary loss. Although, there exists plenty of safeguards for customer and transaction data, in the current scenario, cybercriminals are running organized hacking operations that cannot be addressed by internal resources alone.
Chief risk officers have identified cybersecurity concerns as the top priority and this issue has become a key responsibility of the board of directors and senior management teams. Firms require a structure to recognize business issues connected to security, while simultaneously dealing with evolving cyber threats. An integrated approach is required to best utilize solutions for uncompromising security. However, the technology and resources available to attackers have been developing at a faster rate than the cybersecurity systems enacted by banks. This was evident in a number of cyberattacks targeting systems running on Society for Worldwide Interbank Financial Telecommunication networks since the solution unifies a majority of the players in the market. Several banks in more than ten countries around the world were victims of hackers. The world’s financial ecosystem was breached using malware that manipulated applications responsible for cross-border transactions to withdraw money from financial organizations around the world. Another form of attacks was using the first automated teller machine (ATM) malware-as-a-service, with bad actors providing malicious software and video instructions necessary for gaining illegal access. This allowed non-professionals to buy a subscription for activating the malware program, gain access to an ATM, and withdraw money. Additionally, bank domains were hijacked to gain access to customer’s electronic operations and perform phishing attacks and install malicious code.
Financial organizations need to increase responsiveness to address the gaps in cybersecurity, as delays cause loss of both money and customers during the downtime incurred after an attack. According to a study by Accenture, leading cybersecurity firms displayed certain characteristics that included immediate reporting of security incidents to a higher authority, separation of responsibility and authority relating to security protocols, and effective communication of secure communication among all employees. Additionally, in leading companies, the chief information security officer set mission directives for defining a security strategy and initiatives. The cybersecurity teams were also allocated sufficient resources to manage existing threats, while preparing for newer types of attacks. Since transactions are no longer limited to landlines and desktop computers, but instead being replaced by cell phones and tablets, it is critical to protect these platforms from unauthorized access to customers’ accounts. Banks need to provide secure mobile applications that not only handle security concerns but also provide an optimal customer experience.
What to do for better Financial Security?:
For an effective cybersecurity strategy, there must exist a combination of defense, assurance, and resilience. Banking operational infrastructure requires a radical shift in mind-set to tackle cyberthreats comprehensively and security needs to be applied as a reported metric while maintaining certain standards across all organizational levels. While outsourcing cybersecurity can be a huge benefit, the organization must set a systematic approach for determining action plan, allocate roles and responsibilities in case of a cyberattack. Although banks are investing significantly to improve cybersecurity, the gap between investments in technology and the solutions for mitigating cybersecurity vulnerabilities is increasing. There is focus on improved system protection, encryption devices, and intelligence gathering. Some players in the market have begun exploring new technologies to identify and combat hackers. Biometrics are being installed at ATMs and also being used for added security authentication in mobile transactions. New technologies offer features such as identifying anomalies in network traffic to identify threats and prompt alerts of possible breaches. Banks can apply threat monitoring to evaluate vulnerabilities and leverage threat intelligence to identify cyber criminals’ attacks. Data visualization can also be a great tool to not only identify suspicious behavior from criminals, but also from customers and employees.
Physical security is another important aspect of the financial industry. Banks are moving away from the “open look” and instead installing bulletproof glass partitions at teller stations to prevent holdups, especially in urban areas. Alarm systems, traditionally connected to reporting stations and law enforcement institutions are planning to outsource day-to-day monitoring and security operations in an attempt to reduce costs. For instance, outsourcing remote video management services help decrease the headcount of security personnel. There is also a need to evaluate the security controls of banking institutions, especially older branches to ensure that upgrades are performed regularly and modern technologies are implemented.
Financial institutions must take a proactive stance towards both physical and cyber security, by constantly monitoring, testing, and researching emerging technologies. Since reactive security approaches are not sufficient to maintain effective security programs and regulatory compliance. In-house cybersecurity teams may have been to able to contain threats in the past, but with the increasing number of security incursions, there has risen a need for outside expertise and effective partnerships with cloud and service providers. The cause for a majority of the security breaches has always been a result of the human factor leading to error, negligence, and failure to follow security protocols. Moreover, there is a need to develop organized and integrated programs to raise awareness of security protocols and encourage proper procedures for individuals to follow. To manage human components whether malicious or accidental requires threat networks and enhanced behavior analytics.
The number of attacks aimed at the financial sector has increased continuously over the years, and the focus is on the organization’s infrastructure and employees, not on the customer. Therefore, financial institutions will need to invest in cybersecurity to keep up with competitors and adapt to emerging threats. Banks will need to rely on security solutions to continue normal business operations and assure customers and investors that they are dealing with a secure bank. By understanding the true value of investing in security, banks will experience profitability and stability.
MiFID II / MiFIR Transaction Reporting: A Practical Guide
White Paper By: Duco
One of the main criticisms of the original MiFID was that national regulators did not enforce the directive with the same zeal across Europe. The list of financial instruments covered has been extended to almost all instruments traded in European markets – with particular emphasis on the OTC derivatives market that was previously out of scope for MiFID I. The issue with making this...
MiFID II data reconciliation: A practical guide
White Paper By: Duco
Data risk is an increasing challenge in the financial industry, for the innumerable processes that need to be taken care, before reporting the data to the regulators. It is extremely important to stay complaint and maintain data quality for Markets in Financial Instruments Directive II (MIFID II) during data reconciliation. Duco Cube with its powerful and flexible reconciliation platform...
Delivering the Future of ATM Management Through Product Innovation Today
White Paper By: TEKchand
While large financial institutions have the resources and IT departments to develop their own ATM technology path, many smaller-to-midsized credit unions and financial institutions depend on their transaction processor or ATM hardware manufacturer to deliver new ATM products and functionalities. After many trials and tribulations, change is finally entering the ATM channel to make life...
Don’t Wreck your Recs: Achieve a Golden Source for your Financial Controls Data
White Paper By: AutoRek
Reconciliations form the foundation of a tightly controlled finance or operations department in any organization. Transparent, up-to-date and accurate financial data is not just essential for regulators or auditors, but it is increasingly an important tool for the executive branch to shape corporate strategy. Building an automated reconciliation framework can be an expensive, complex and...
How Financial Services are Achieving Technology-Enabled Competitive Advantage
White Paper By: Adlib
Competitive advantage in the financial services can be achieved by delivering an exceptional customer experience. This, as we all know, is a Herculean task and questions like “How to drive the business growth in financial services industry?”, “How financial services are achieving technology-enabled competitive advantage?”, “How the management of business...
7 Ways Financial Institutions can Leverage Technology for Competitive Advantage
White Paper By: Trigent Software
In the present scenario, financial institutions are tired of the proliferation of technology innovations. Unless, financial institutions are ready to replace or transform their IT architecture, their challenges in the next decade will be daunting. This whitepaper highlights the impact of technology failure and its crippling impact on a financial institution and how technology can help reduce...