While operational risks are a key consideration for all types of organisations, family offices often find that they have a unique set of challenges regarding the privacy of the family members as well as the security of financial assets.
Campden Wealth released their Family Office Report 2023 for North America, Europe, and APAC. The below article summarises the operational risks faced by family offices in these regions and the measures taken to counter them.
North America
North American family offices list cybersecurity (61%) as a top concern, followed by using manual processes (60%).
21% of family offices in North America reported they were victims of cyberattacks – making it more prevalent in this region than the others. The concern about manual processes leads directly to the importance of upgrading technology. However, the latter is a concern shared only by 40% of family offices in the region.
Those who faced cyberattacks reported generally ‘insignificant’ financial loss, while a quarter reported that cyberattacks revealed data or personal information. To counter this, dual authorisation has become the standard, with 78% of family offices implementing them. To ensure protection against cyber-attacks, 73% of family offices have backup servers.
Europe
The top concern of family offices in this region is cybersecurity, followed by tax, regulation, and compliance issues.
51% of family offices cited cyber-attacks and data breaches as a cause of concern. The report reveals that 11% of European family offices had faced cyberattacks in the previous 24 months. With tax, regulation, and compliance issues (cited by 38%), it is believed that with the advent of remote working and digitalisation, cross-border taxation is getting more complex, which is concerning for family offices.
To counter these risks, 83% of European family offices use backup servers and 73% enforce a data security policy. Additionally, control of remote access working (59%) and staff training (49%) are some more measures used to mitigate these operational risks.
Asia Pacific (APAC)
As with the other regions, family offices in Asia-Pacific, too, believe cybersecurity to be the biggest operational risk (64%). This is followed by manual processes (57%), which introduces the risk of human error.
Despite being the top concern, only 3% of family offices in the region experienced a cyberattack in the last 24 months. The concern about the use of manual processes brings in the need to upgrade technology, as these risks can be even more apparent when combined with key person risk. When one person handles all manual processes, it can create an issue when they leave.
To mitigate these risks, 75% of APAC family offices use backup servers, and 75% enforce a data security policy. Additionally, 67% of family offices have a business continuity plan outlining how operations can continue in case of emergencies.
Operational Risks Faced by Family Offices
Cybersecurity is a pressing concern for family offices due to the increasing digitisation of financial operations. With the potential for substantial wealth at risk, family offices are prime targets for cyber threats. Safeguarding sensitive data and financial assets is paramount to protect the privacy and security of family members.
In navigating the aforementioned operational risks, family offices worldwide recognise the importance of staying ahead of technological advancements, implementing stringent security measures, and fostering a culture of continuous staff training. As the landscape continues to evolve, proactive risk management remains paramount for family offices to safeguard the interests of their members and the assets they manage.
Asora
