Beyond Compliance: Why Data Protection Is So Important to Financial Services

The financial services industry is under increasing scrutiny, especially as cybersecurity threats rise in both scale and complexity. For banks, asset managers and insurance companies alike, protecting sensitive client data is not only a regulatory requirement but a fundamental aspect of maintaining trust and operational stability.

Recent high-profile breaches and the growing complexities of global compliance standards highlight the urgent need for financial services institutions (FSIs) to reassess their data protection strategies. Amid shifting regulations and rising cybercriminal sophistication, a strong data protection strategy is essential for FSIs.

The regulatory landscape is in a state of dynamic flux, especially as new international compliance requirements are poised to become adopted nationally. These international regulations include:

• Basel III, which requires banks to maintain operational resilience and ensure financial stability during disruptions.
• Digital Operational Resilience Act (DORA), mandating Information and Communications Technology risk management, resilience testing and incident reporting for financial institutions in the European Union (EU).

In the U.S., the Consumer Financial Protection Bureau (CFPB) enforces operational risk management, including cyber resilience and disaster recovery planning — but one of their key roles lies in defining rules for data sharing between banks, fintechs and third-party providers.

In addition, FSIs must be mindful of US regulations like:

• Gramm-Leach-Bliley Act (GLBA):  Requires financial institutions to develop a written information security program that includes contingency planning and disaster recovery.
• Sarbanes-Oxley Act (SOX): Mandates financial institutions to maintain reliable data protection and business continuity measures.
• Federal Financial Institutions Examination Council (FFIEC) Guidelines: Requires banks and financial firms to implement business continuity planning (BCP) and DRP with regular testing and audits.

However, compliance with these regulations is not an end in itself; it is a baseline. As many FSIs discovered during last year's regulatory upheaval, ensuring compliance by developing effective data visibility and control strategies can dramatically reduce risks while maintaining reputations as well.

As one of the most heavily targeted industries for cyberattacks, financial services institutions must be prepared for anything. Attack surfaces have expanded, especially as e-commerce platforms, user-connected devices and cloud services have exposed customers to new vulnerabilities. At the same time, well-funded cybercriminal groups are leveraging increasingly advanced techniques like artificial intelligence (AI) and quantum computing to break traditional defenses.

Keeping pace with these evolving threats while maintaining compliance with regulations and ensuring operational efficiency means that FSIs must improve visibility and controls across their environments with strong data protection practices. For some, however, defining that data protection footprint may be easier said than done.

For instance, while many FSIs may have a disaster recovery plan in place, today it’s equally important to ensure that their data protection footprint includes considerations for infrastructure and methodologies to be in place to recover the most important data while maintaining operations following a cyber incident.

This is because cyberattackers have become increasingly stealthy, often lying dormant within systems before launching an attack. Their first target: backups. Staying ahead of these attackers means moving beyond backup systems to incorporate “clean rooms” and immutable vault solutions to ensure secure storage and protection of critical data.

The risks associated with ineffective data protection controls are significant, especially for high-volume transactional FSIs. The downtime cost per minute can be tens of thousands of dollars — but what may be even more damaging is the loss of customer trust following a cyber incident. Recovering critical infrastructure can take up to 24 days on average for full recovery, for example. Aside from the financial cost to your business from a 24-day freeze, how long would it take to regain customer trust?

With all of the potential risks, changing regulations and advanced attack techniques in the financial services industry today, where should you focus your data protection efforts? First, it’s important to understand that data protection strategies are a framework. There is no one single data protection solution that will check every box for every FSI because each organization has its own unique data protection needs. 

The first step is to determine whether your current data protection platform meets your needs for:

• Operational recovery: Data protection methodologies can help restore business-related data in the event of a run-of-the-mill user inadvertently deleting a file on a shared folder, for instance. Mature operational recovery processes, on the other hand, ensure that IT operations are capable of meeting business user expectations to maximize productivity.
  
  
• Disaster recovery:  For many FSIs, the ability to recover sensitive data is the most important consideration. While some institutions may have previously set up continuous data protection and application-based replication plans, others may not understand that this same technology can be used to proliferate malware in an event like a ransomware attack. Full recovery may necessitate separate cyber recovery methodologies.
  
  
• Cyber recovery: While many organizations have disaster recovery strategies in place, fewer have implemented comprehensive cyber recovery plans. This means including considerations for minimum viable recovery and minimum viable company. For example, if your organization uses over 100 apps daily, which ones must be up and running for the organization to still be considered “revenue-generating” after an attack?

If gaps are identified in your current data protection platform, it may be time to consider a modern data protection solution that offers advanced features such as cross-platform support, automated backups and testing, continuous monitoring and secure offsite storage.

Ensuring that your organization has a strong data protection strategy in place starts with an expert consultation. A partner with years of experience in financial services solutions, data protection and cybersecurity can help evaluate your existing data protection environment by identifying gaps and opportunities for improvement.

A data protection strategy should include the following best practices.

• Developing a robust risk management program that aligns with your data protection strategy.
  
  
• Using strong encryption, immutability and replication strategies for sensitive data both at rest and in transit.
  
  
• Continuously monitoring systems for anomalous behavior, potential vulnerabilities or breaches.
  
  
• Instituting a well-documented incident response plan which includes communication protocols among teams and sound recovery playbooks that document the most common recovery types for the organization.
  
  
• Regularly testing operational, disaster and cyber recovery processes to ensure they are effective in the event of an incident.

Data protection experts at CDW use a few key services to help FSIs build a comprehensive data protection plan:

1. A Data Protection Scorecard is a collection of the 500+ most common requirements around data protection solutions. Regularly validated through frequent meetings with top partners and independently tested within CDW’s dedicated data protection lab, this scorecard enables businesses to find a data protection solution that best matches their needs.
   
   
2. During a Data Protection Modernization Assessment, CDW experts will assess your current platform through interviews with key stakeholders and analytics tools to provide a holistic view of your existing environment. With an extensive health evaluation of your data protection ecosystem, you’ll get a clearer picture of what your modern data protection environment should look like to ensure recoverability in any scenario.
   
   
3. The Cyber Resilience Data Protection Workshop allows engagement with a CDW Data Protection expert using a curated set of controls based upon the NIST 2.0 framework. After a discovery period, data protection engineers will establish a set of observations and findings, to inform their final deliverable. From there, organizations can opt in for additional vendor-based security hardening analysis to help form a more complete picture of compliance.

As cybersecurity threats escalate and regulatory requirements continue to evolve, an effective data protection strategy should be top of mind for FSIs of any size. From mitigating risks and ensuring compliance to maintaining cyber resilience, robust data protection strategies hold the key to operational efficiency and long-term success.

No two financial institutions are the same, and their data protection needs are equally unique. The solutions under your data protection “umbrella” are designed to help your organization weather any storm while moving it forward. Whether it’s intrusion prevention, simplifying hybrid infrastructure, disaster recovery planning or cyber recovery, an expert partner should be able to help you navigate the complex regulatory landscape, mitigate risks and ensure robust data protection in any situation.