NEWSLETTER

Family office insights this week:

• Taking a proactive approach to security and risk

• Family Office tech platforms

• How dysfunctional was your Thanksgiving?

• Three senior family office jobs

• Podcasts: locking your digital door

Family Offices Under Fire: Why Security Can’t Be Ignored

As family offices gain more assets and attention, so the security risks increase.

Despite the object of long-term wealth preservation, not all family offices approach security and risk management professionally.

In fact, a recent survey found almost a third of family offices take a purely reactionary approach.

With money comes scrutiny, and in today’s digital world, it’s increasingly difficult for wealthy families to fly under the radar.

As reliance on technology increases and criminals become more sophisticated, those risks are amping up.

There are some basic steps every family office can take to mitigate risk and security concerns - understanding and implementing these should be part of any modern family office.

The Risk Hotspots and Blindspots

Digital risk and cybersecurity 

The number of family offices suffering a cyberattack rose to 25% last year. 

Criminal or unauthorized use of personal or business data for financial crimes or extortion has become commonplace, and the dark web, where illegal sharing of this data occurs, is readily accessible.

Anyone with access to wealth data should operate with secure infrastructure and systems that protect this data, to both anticipate and prevent cybercrime attempts.

Unfortunately the adoption of secure protocols is slow, with family offices still managing trillions using cloud-based spreadsheets that are easily hacked.

Many family offices and UHNWIs don’t understand the risks they face, both in terms of systems vulnerability and how their personal data can be used to harm them.

“Clients are often surprised to learn how vulnerable they are to threats like stalking, hacking, or online defamation,” says Chad Nelson, a former national security professional that founded Biscayne Strategic Solutions, providing boutique security services to UHNWIs and family offices.

“They often assume these issues only affect others, not realizing how easily a seemingly minor incident can escalate in today’s interconnected world. This highlights the critical need for proactive risk management to address potential threats before they materialize.”

Reputational concern

There is an increasing need to protect against reputation damage.

Reputational damage can sour relationships and tarnish the family name, creating a ripple effect that impacts family and staff morale while jeopardizing business opportunities.

Situations can arise from negative publicity caused by individual actions, but also vengeful activity taken against family members that may be prominent in the media or who have had their data stolen or traded on the dark web.

Social media has also become an accessible tool wielded by anonymous detractors to cause harm or attempt extortion, with many users unaware of the risks.

“Past online activity, including comments, likes, retweets, or posts, can be used against them,” says Nelson on the subject of social media reputational risk. “Many clients have come to us after being the target of online defamation campaigns intended to harm their brand, reputation, and ultimately their wealth.”

Insider threats 

Both financial and non-financial threats can often come from those closest to the family office, through staff or even family members unintentionally causing harm.

There is the risk of deliberate fraud, theft and mismanagement due to inadequate controls or resources.

Family offices are often short-staffed in key areas and often make hires based on cultural fit, without rigorous due diligence being followed.

Similarly, comprehensive due diligence is needed with investment partners, advisors and managers before they become part of the close family office circle.

Turnover of key employees can exacerbate risks (long-term incentive programs can reduce turnover and mitigate risk).

Physical risk

Managing physical risk goes beyond just personal safety. It encompasses holistic planning and health risks.

Healthcare and access to the appropriate network of medical providers - regardless of worldwide location - is critical for family members in emergencies.

A growing number of private healthcare service providers provide a unique solution for family offices (more on this in next week’s newsletter).

Physical security should consider protection against everything from theft, intimidation, stalking, kidnapping and ransom to death threats and property vandalism.

Depending on location and threat concern, access control and modern surveillance systems plus experienced security professionals can be required to guarantee physical safety.

Again, the digital world has become intertwined with the physical, with social media often exposing family members to unnecessary physical risk through their online behavior - something that Nelson says is entirely avoidable.

“Individuals should start by identifying and proactively removing any social media posts that disclose sensitive information, such as photos of personal residences, references to frequently visited locations (schools, vacation spots, churches, or private clubs), or details about personal vehicles and aircraft. This information can be exploited by criminals, hackers, or other malicious actors to track and target the family.”

How to mitigate risk

In short, family offices need to be proactive rather than reactive. 

Proper IT and operational structures are a must to minimize cybersecurity vulnerabilities, and while cyber insurance coverage is valuable, it should not be the first line of defense.

HR has a role to play, both in performing due diligence on new hires and implementing measures to reduce key person risk (a perennial issue in family offices)

Having a proper family governance strategy is another key element. It should be put in place with the participation of family members, and with ongoing communications to avoid potential feuds and infighting that can lead to reputational fallout.

Ongoing digital privacy and threat monitoring programs are valuable. They proactively assess exposures and help reduce risks.

“An evaluation should include searching for exposed personal information on the dark web, as well as other online vulnerabilities,” says Chad. “And should not only include the principal but also extend to the online presence of immediate family members, as spouses and children are often targeted to gain access to the primary individual. Proactively addressing these risks is essential to building a strong foundation for digital security.”

Insightful resources

With increased demand there are now service providers specializing in security and risk management solutions to family offices and UHNWIs.

There are also regular reports to keep updated: two notable ones being the Dentons Evolving Risk Landscape For Family Offices report and the comprehensive Simple Family Office Security & Risk report.

Find the right experts

At the end of the day it’s up to wealthy individuals and family offices themselves to put effective measures in place.

Perhaps most importantly, the first step is to seek outside help thorough a risk audit.

Dentons found that almost half of family office executives responsible for obtaining risk advice may be inexperienced, and don’t know the right questions to ask.

So the opportunity is there for third-party service providers to step up and lead the change.

Service providers can help family offices understand the need to take a proactive approach to adequately prepare for any risks they may face.

Peace of mind comes not from hoping risks can be avoided, but from knowing you are fully prepared. Or to put it another way, don’t bolt on security, bake it in.

This newsletter is sponsored by Biscayne Strategic Solutions

Is your family office secure? Biscayne offers boutique security services for UHNW families, executives, and entrepreneurs. Our expert team, led by former US national security professionals, provide early alerts on privacy, safety and reputational risks to clients. With our Persistent Threat Monitoring, we track everything from social media to the dark web, giving you unmatched protection and peace of mind online.

We help prevent compromising situations and our team acts rapidly in an emergency. UHNWIs, executives and family offices are increasingly a target for cyber criminals - if you think this doesn't apply to you, expand your perspective and read some of our Case Studies here.

𝕏 highlights

The rise of direct investing.

Tech platforms at family offices.

Happy Thanksgiving… hopefully less dysfunctional than this one.

 💼 where to work

Three notable family office job opportunities posted this week…

Vice President of Finance - Private Family Office (New York / Single Family Office)

Head of Global Family Office for Wealth Services - State Street (Boston / Service Provider)

Senior Vice President of Accounting - Private Family Office (New York / Single Family Office)

📚 what to read

This week I’ve been listening to The Diary of a CEO by Steven Bartlett. It’s a short, easy listen. While it’s called the Diary of a CEO, it’s heavily focused on marketing and branding. And Bartlett knows marketing and branding extremely well. I’d recommend this to younger generations and those who want to connect with younger generations.

📻 what to listen to

The Economics of Everyday Things podcast from the Freakonomics team. It’s a fun dive into the economics of anything from stadium names to Botox.

📺 what to watch

On the topic of digital security, a TED Talk by Dr. Leon Geter on locking your digital door.

And finally…

Time to ask for a favor…

If you are enjoying the newsletter, could you hit reply and write a short testimonial?

We would like to include a few reader comments on the website (coming soon).

Our goal is to grow the audience in order to enhance and expand the network. Comments from trusted readers will be invaluable in achieving this.

This week saw the latest Dealflow newsletter, if you missed it, you can find it here.

Both the Dealflow and Jobs newsletters will be back in December.

Family Office Buzz will be back on Monday (here’s the last edition if you missed it) with more of the best content on family offices and beyond.

Until next week, see you on 𝕏 or LinkedIn

X

𝕏 @MrFamilyOffice

𝕏 The Family Office Community

in LinkedIn

✉️ [email protected]

📶 RSS feed