The financial services industry (FSI) is a complex ecosystem in which each entity has dependencies on others around it. In this highly interconnected sector, an attack on one part of the ecosystem can result in collateral damage and detrimental implications for other organizations across the sector.

With that risk profile in mind, forward-leaning financial services firms are working on response plans to cyberattacks by preparing for both incidents that could target their individual company and attacks that could impact third-party entities with whom they are integrated on varying levels.

But are financial services ready to respond to a systemic attack that could impact their overarching infrastructure across borders?

In the Crosshairs: The Weaker Links in the Chain

The FSI continues to face new and challenging attacks every day. In a longstanding arms race against financial cybercrime, this sector is considered one of the most security-forward industries. Many threat actors thus look for the weakest point in the tightly knit financial services network and then work to extend their attack across the more protected links in the system.

For example, cybercriminals often target community banks and credit unions, likely assuming these smaller entities have humbler security budgets. While smaller financial institutions are responsible for managing almost 50 percent of the core deposits held by banks in the U.S., they often have limited cybersecurity budgets and substantially smaller security staff in house. Adversarial activities of all types — whether facilitated by banking Trojans or directly affecting the bank’s internal networks — could start at smaller organizations and spread out to larger ones as a next step.

Systemic Cyberattacks Are on the Horizon

As a means to disrupt critical infrastructure by impacting the economy, nation-state threat actors have also been focusing on ways to disable large parts of the financial services ecosystem by planning a more systemic cyberattack. Those affected by such a threat could potentially include public cloud providers, software-as-a-service (SaaS) providers, and third parties that provide mission-critical infrastructure and systems that support payment switches, core banking assets and credit card processing systems.

It is important to note that banks, investment management firms and credit card companies are generally highly dependent on their third-party providers, making them targets of the same threat actors whose goal it is to cripple the banking system.

Given the heightened risk and potential implications that a systemic cyberattack would have on a country’s financial system, IBM Security has been working with a number of third-party providers to ensure that organizations in the FSI are preparing a response to an inevitable large-scale attack.

As much as we prepare for other incidents, it is critical to ensure that the industry develops a response runbook for such scenarios to outline roles and responsibilities for the various parties that encompass the totality of the FSI. For example, the U.S. financial industry is an integrated ecosystem that is part of a global banking and payment ecosystem. The U.S. cannot operate in an isolated mode simply by protecting its own banks in the 24/7, always-on world in which we operate.

Many of the entities that encompass the financial services ecosystem are global companies, and it is crucial that industry leaders work together to develop runbooks and capabilities to respond in an environment where cybersecurity experts, senior leadership teams and even boards of directors are distributed all over the world.

Most financial services companies are not prepared to respond to a situation that could affect more than one location and key employees who are distributed around the world. Financial services companies must ensure that they have the capabilities for a truly global incident response in place, as well as the ability to coordinate across multiple time zones and geographies. This especially requires meticulous planning in view of the difference in regulations and laws in each locale.

Testing the Waters on Both Sides of the Pond

Recently, IBM and Finastra, a leading provider of core banking and payment systems in the fintech sector, had the opportunity to run a unique cybersecurity incident response exercise in which key Finastra personnel were located at both the IBM X-Force Command Center in Cambridge, Massachusetts, and the IBM X-Force Cyber Tactical Operations Center (C-TOC) — the first fully immersive mobile cyber range — in London.

As Elona Ruka-Wright, global chief risk officer at Finastra, stated, “When it comes to being crisis-ready, preparation is key. Processes are preestablished, best practices are put into place, and systems and controls are identified and stress-tested. But when a crisis occurs, there is no way to know exactly how everything will come together despite well-intentioned plans. So when Finastra was presented with the first-of-its-kind opportunity to put ourselves to the test at the IBM X-Force Cyber Command Centers in London and Cambridge, Massachusetts, we jumped at the chance to exercise our plans and processes.”

This exercise was very insightful to potential issues that may arise during such an attack, having created a first true “hot wash” for financial organizations where the crisis was first declared in London, in the C-TOC. Then, at 6 a.m. EST in Cambridge, the U.S-based Finastra team arrived at the X-Force Command Center for a coordinated handoff between London and the U.S.

Ruka-Wright further noted that “the day provided an invaluable experience that would have been difficult without IBM; the opportunity to be challenged by a realistic crisis in a safe environment and test our plans and processes without facing a real-life catastrophe. Through a team of experts and state-of-the-art technology, IBM was able to create a scenario that encouraged the response teams to collaborate, respond and manage through a serious event over the course of the day, even spanning time zones.”

The exercise was a key example of the steps that global financial organizations must take to ensure they can respond to a multisite cybersecurity crisis requiring a coordinated incident response plan that goes beyond one geographic region.

The fact that cyberattacks also run the real risk of causing a systemic breakdown of the FSI’s infrastructure stresses the importance of financial services providers working hand-in-hand with their critical third parties to ensure there is an incident management and response plan in place. Such plan should help facilitate a joint response where critical decisions are not being made in an isolated manner, but rather in a coordinated fashion across the different affected parties.

Some points to consider include:

• Revising overall business risk assessments to allow more focus on response, recovery and reestablishment of services as needed;
• Working out policy responses to enable collaborative response to flow through jurisdictions and across borders; and
• Undertaking a deeper study of the threat landscape as it pertains to potential cyberattacks from nation-state adversaries and cybercriminals alike, and using threat intelligence to foresee potential disruptions.

For more information about incident response training, and to train with the world’s premier cyber special forces team, check out IBM Security’s incident response services.