Financial Services Firms Coming Up Short On Security

Financial services firms are falling behind on a lot of things these days -- and IT security is definitely one of them, according to a new report.

According to a survey of more than 650 financial services executives released yesterday by PricewaterhouseCoopers (PwC), more than half (54 percent) of companies in the industry do not have an accurate inventory of where personal data for employees and customers is collected, transmitted, or stored. A little more than half (51 percent) of respondents said they do not require third-party service providers to comply with their company's privacy policies.

The survey found that just 45 percent of financial services firms perform due diligence on the third parties that handle the personal data of customers and employees. Yet most respondents (81 percent) consider themselves either "somewhat" or "very" confident in the information security practices of their partners and suppliers, the study says.

Forty-one percent of respondents reported that their organization's security policies do not address incident response, and 56 percent do not have a process to address breaches involving data entrusted to third parties. Thirty-eight percent of the respondents did not know the number of security incidents that had occurred in the past year, 44 percent did not know what types of incidents had occurred, and 45 percent could not identify the likely source of the incidents.

Many financial services firms focus predominantly on protecting customer data, but employee data can be a far richer trove of information for identity thieves, PwC says. When security breaches occurred, survey respondents indicated that employee records were just as likely as customer records to be affected (40 percent versus 38 percent).

Forty-one percent of the respondents said their firms do not encrypt data stored in databases, 52 percent do not encrypt file shares, and 43 percent do not encrypt backup tapes. Thirty-three percent do not employ laptop encryption, according to PwC.

"Financial services firms should re-examine their security networks to help ensure compliance with privacy and data-protection regulations, embed a culture of privacy and security in their operations, and embrace security as a key element of their risk management structure and a potential competitive differentiator," says Sergio Pedro, managing director at PwC.

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