Importance of financial data security

Data security is one of the biggest problems for most businesses. It is of paramount importance for financial companies as financial information plays a crucial role for such firms. It also enhances the importance of economic data security for accounting firms where they have to trade with the financial data of many customers.

This blog post will check the best methods for data security and privacy for organisations.

Table of contents

What is financial data security?

Data security means protecting data from unauthorised access and corruption throughout its lifecycle.

It includes safeguarding data from attacks that can encrypt, destroy, modify or corrupt your data. It’s an important part of the IT security policy for companies of any size across all sectors.

The following are some of the causes why data security is essential:

  • To sustain business continuity
  • To stop data breaches and fraud
  • To prevent illegal access to confidential information

Data security risks in the financial services

Traditional IT security seeks to prevent unauthorised access to data, but this is insufficient given how quickly technology and data security are evolving. Due to these changes, your financial institution must address data breach prevention and the detection, response, and policy procedures necessary to guarantee complete data security.

These threats include:

  • Malware viruses are transferred via files on storage devices, email attachments, and interactions with a spammy website.
  • Hackers use malware to gain access to the control systems remotely, remove or steal sensitive data and spread even more malware.
  • Online and offline scams and phishing attempts developed to trick people and businesses into revealing sensitive information.
  • Advanced and sophisticated computer hardware and software attacks using AI and machine learning
  • Third-party services that have access to information can become a weak link in the chain and result in stolen or lost data.
  • Internal data security problems created by careless or under-trained employees

Now that we have covered the threats to the financial sector, let’s check out why data security is so crucial for the industry.

Data security: Top 7 best practices

1. Establish a cybersecurity policy and incident response plan

A cybersecurity policy is an overview of all the requirements your business should meet, the methods you intend to implement, and the tools that can be used.

A documented cybersecurity policy makes it easier for a firm to create an effective and efficient cybersecurity routine and maintain data security in the long term.

Along with a cybersecurity policy, every financial organisation should have a well-planned incident response plan. This plan should outline clear action strategies for different circumstances that your organisation may face.

In particular, such a strategy should determine what can be regarded as a cybersecurity incident, the first steps in case of a cybersecurity incident, and what to do to restore affected systems or lost data.

2. Back up your data

You have to duplicate critical company assets to create redundancy and serve as backups. Backups are nothing more than the periodic archiving of the data so that you may access it in the event of a server failure. There are three main backup types that businesses are concerned about from a security perspective:

  • Full backup

A full backup is created when all files and folders are thoroughly copied. This backup technique takes the longest to complete; it could strain your network if the backup is done online. Full backups on a regular schedule need more storage than the other two methods.

  • Incremental backup

According to this method, only the data that has changed since the last complete backup will be backed up again after at least one full backup. Incremental backups need less space and effort to create but require the greatest time to recover a whole system.

  • Differential backup

Differential backups are a compromise between performing regular incremental backups and full backups. Only a small portion of data is backed up between the period of the last backup and the current one, taking less storage space and needing less time and investment.

3. Harden your systems

You should sufficiently secure any location where sensitive data could reside based on the kind of information that the system could potentially have access to.

This would include all external systems that could access the internal network via a remote connection with significant privileges since a network is only as secure as the weakest link. However, you must still consider usability and determine an appropriate balance between functionality and security.

Another helpful data security measure is setting up a BIOS password to prevent attacks from booting into your operating systems. It’s also important to pay attention to gadgets like USB flash drives, Bluetooth devices, smartphones, tablets, and computers.

4. Raising awareness in employees

 The best strategy to deal with employee negligence and security errors is to educate them on the importance of data safety.

  • Employees should receive sufficient training to inform them of the firm’s data usage regulations and emphasis that the organisation takes data security seriously and can actively enforce the policy.
  • Additionally, with the proper community awareness, workers should undergo regular testing and training to improve and evaluate their understanding of data security.

Security measures are helpful, but they can’t restrict every action. For instance, if workers open each attachment from every mail, there are possibilities of a zero-day attack, or any other misconduct not listed in antivirus databases could damage the system. The following measures should be taken into consideration;

  • Increase awareness about cyber threats the firm can face and how they disturb the organisation’s bottom line,
  • Emphasise the importance of every computer security measure
  • Present real-life security-based attacks, their impact and outcomes and how difficult the recovery process is.
  • Ask workers to provide feedback on the existing security measures system.

5. Deploying a multi-factor authentication

 Despite solid efforts, a worker can make security errors that could compromise data security.

Multi-factor authentication setting across the primary networks and email services is simple to deploy and create an additional layer of security.

For instance, use the phone number of workers as a second form of identification since it is doubtful for a thief to have both a pin and a password.

The hackers still need to get a second or third authentication factor such as a fingerprint, security pin, voice recognition, or OTP confirmation on mobile phones.

6. Technical Control

In most scenarios, users shouldn’t be permitted to copy or compile sensitive data on local discs. In certain situations, both the client and server’s caches should be entirely cleared after the user logs off or a session ends.

You shouldn’t store sensitive information on any portable system; instead, every system should have a login requirement and be equipped with conditions that cause it to lock if any shady or questionable activity occurs.

7. Other important tips
  • Strong password

One of the crucial factors for ensuring data security is to have a strong password, and it must be not easy so that the hackers can’t obtain the password by using trial methods.

  • Data encryption

It is one of the best practices to protect data, particularly when you transfer it, and a lot of software can offer fantastic data encryption while sending the message or transfer.

  • Using the best antivirus software

No doubt, many antivirus software are available, and one needs to pick the one that protects them from viruses and malware.

  • Ask for help

If your company doesn’t have an internal compliance officer and you have more questions than answers, you might want to hire outside experts who are aware of the laws relevant to your business.

With the help of a professional, you might be able to quickly and effectively modify your information security policy, thus saving you money.

  • Examine danger levels regularly

Many compliance laws need you to do periodic risk assessments. It is nothing but:

  • Determining hazards.
  • Evaluating the possibility of occurrence and the potential impact of hazards.
  • Implementing steps to mitigate the most critical risks.
  • Assessing the success of the executed measures.

Final thoughts

Data is a valuable asset that any company generates, acquires, saves, and exchanges. A business can avoid financial loss, reputational damage, loss of customer trust, and brand erosion by protecting it from internal and external corruption and unauthorised access.

Furthermore, a corporation must achieve and maintain compliance everywhere it conducts business due to laws for data security enforced by the government and the industry.

Experlu Editorial Team
The editorial team at Experlu is comprised of seasoned financial professionals dedicated to providing high-quality content on accounting and finance. With a wealth of experience and diverse expertise, the team produces insightful articles that have established the Experlu blog as the UK's leading financial and accounting resource. The team includes accountants, auditors, and business advisors who stay updated with the latest industry developments. Their commitment to excellence ensures that Experlu remains a trusted source of information, helping readers stay informed about audit, business, finance, and tax matters.