Addressing Cyber-Risk in Financial Institutions and in the Financial System

Abstract

Regulators and financial institutions must focus the financial industry on significant systems investments to prevent current and future cyber infrastructure threats. This paper organizes the latest research and views on cyber-risk management to enable insights into frequency and severity of cyber-risk events, the magnitude of cyber-risk losses, and the best practices methods and frameworks for organizing and implementing a cyber-risk management program. This paper also describes cryptographic best practices and the evolving research on protection of cyber-attacks in the coming Quantum computing era.

The paper concludes that governments must work with their financial market constituents to use one or more of the cyber-risk management frameworks to standardize collection and reporting of cyber-risk events. Finally, government and industry members must work together to finance and rebuild financial institutions’ legacy systems and financial industry infrastructure to enable cyber-risk management solutions.

Keywords: Cyber-risk, risk management, encryption, quantum computers

JEL Classification: O16, O33