Cyber attacks are the biggest risk to the UK financial system, according to new research by the Bank of England. However, financial institutions remain confident in their ability to fend off attacks and believe they are more likely to suffer from the impact of rising inflation.
H2 study of the Bank’s systemic risk surveyed 65 UK financial sector executives and found that 74% of respondents believed that a cyber attack was the biggest risk to the financial sector in both the short and long term, closely followed by inflation or a geopolitical incident.
However, while the attacks are potentially very damaging if they happen, banks remain confident they can repel them. According to the survey, cyber attacks are less likely to materialize (37%) than geopolitical pressures (54%) and the risk of hyperinflation (63%).
The number of respondents who believe their company is at high risk of attacks has risen rapidly this year from 31% in the first half of the year to 62% in the second. Those who consider the threat to be low have dropped by 20% to just 3%. What’s more, 83% believe that cyber risk in the financial sector has increased in the past year.
Over the next three years, 72% of respondents believe the likelihood of a high-impact cyberattack is high, an increase of 26% from the first half of 2022.
However, respondents believe inflation will be the most difficult issue to navigate (61%), followed by cyber attack at 56%.
The survey was conducted in July and August, before Liz Truss took office and financial markets were thrown into turmoil by the fallout from the government’s mini-budget earlier this month.
Why is the risk of cyberattacks increasing in the financial sector?
The sharp increase in this perceived risk may be due to a combination of the industry’s shift to remote work and the growing adoption of cloud-based services. A report published last month by the Bank of International Settlements stated that “the growing adoption of cloud services, as well as the shift to remote work, by both central banks and industry, has key implications for cybersecurity strategies.”
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The blurring of an organization’s digital and physical boundaries increases cyber risk in the financial sector globally. Cloud adoption has also put financial institutions at higher risk, as misconfiguring the cloud transition can have catastrophic consequences. Nearly two out of every three cloud breaches are the result of a misconfigured cloud transition, the report said.
According to communications regulator Ofcom, the risk of the financial sector’s reliance on cloud services can be mitigated by ensuring that the pool of providers is small. “The Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority are considering the systemic risks that UK financial institutions’ reliance on a small number of cloud providers raises to the stability or market integrity of the UK financial system,” the regulator said in report.
Read more: Cloud-based AI can help banks prevent cyberattacks
Cyberattacks are the biggest risk to the UK financial system – Bank of England research