The recent disruption caused by CrowdStrike has been a wake-up call for financial institutions, highlighting that no cybersecurity system is entirely foolproof. However, this realisation doesn’t lessen the need for rigorous preparation against potential cyber threats.
What Happened with CrowdStrike?
CrowdStrike, a well-known cybersecurity company based in Austin, Texas, recently faced a major issue that caused extensive system crashes. The problem originated from a software update to their Falcon Sensor, which led to a "logic error." This error caused systems to crash, showing the infamous "Blue Screen of Death" (BSOD). The company later revealed that a pre-deployment test, meant to catch such errors, failed, leading to widespread issues.
This incident impacted various organisations, including big names like ICE Mortgage Technology, Fifth Third Bank (with $214 billion in assets), TD Bank, and Canandaigua National Bank in New York, which holds $5 billion in assets.
The Need for Better Planning
Dave Martin, founder of the advisory firm BankMechanics, emphasised that while such events are often discussed in theoretical terms when planning for worst-case scenarios, they can quickly become real, underscoring the ardent need for being well-prepared.
According to Martin, this event has likely prompted bank leaders around the world to focus even more on their contingency plans and backup strategies. The fact that this outage affected so many organisations shows just how unpredictable such crises can be.
As cybersecurity threats become more common, financial institutions are increasingly focused on their defences. The risks of not being adequately prepared are growing. For example, after a cyberattack in June, Patelco Credit Union in California, which manages $9.6 billion in assets, is now facing multiple lawsuits. These lawsuits claim that the credit union did not properly secure sensitive data, such as Social Security numbers and addresses.
Andrew Retrum, a managing director at Protiviti, a consulting firm specialising in technology risk and resilience, pointed out that while organisations face numerous potential threats, they should focus on creating strong response and recovery strategies for the most likely negative outcomes, like technology failures or site unavailability.
Preparing for Future Cyber Incidents
Experts agree on the importance of having detailed action plans in place to restore operations quickly after a cyber incident. Kim Phan, a partner at Troutman Pepper who specialises in privacy and data security, advises financial institutions to be ready to switch to alternative systems or service providers if necessary. In some cases, this might even mean going back to manual processes to ensure that operations continue smoothly.
Phan also suggests that financial institutions should manage customer expectations, reminding them that the convenience of instant online services is not something that can always be guaranteed.
The CrowdStrike outage is a recurring reminder of how unpredictable cyber threats can be and how crucial it is to be prepared. Financial institutions must learn from this incident, regularly updating their security measures and contingency plans. While technology is essential in protecting against cyber threats, having a solid, human-driven response plan is equally important for maintaining security and stability.
By looking at past cyber incidents in the banking sector, we can draw valuable lessons that will help strengthen the industry's overall defences against future attacks.
