Turning Challenges into Change: Hedge Fund CFOs’ Agenda for 2024

As malicious actors grow more tech-savvy, active, and effective at compromising your firm’s data, a trend has emerged among hedge fund CFOs – a drive to optimize their combination of managed IT, cybersecurity, data management & information security service providers to streamline operations, bolster defenses, and drive cost efficiency.

For quite a long time, hedge fund CFOs, particularly those without in-house tech expertise, have emphasized using separate managed IT and cybersecurity vendors, viewing it as a system of checks and balances, if you will. The benefit of not allowing the so-called “fox (i.e., managed IT provider) to guard the hen house (i.e., cyber provider)” was seen as outweighing the added complexity, cost, and risk to operational resiliency that this fragmented service management framework introduced.   

CFOs today, however, are laser-focused on streamlining IT and cybersecurity service management. In fact, according to Agio’s 2023 Hedge Fund Cybersecurity Trends Report, nearly half (42%) of hedge fund CFOs reported they intend to consolidate their Cybersecurity and Managed IT services with a single third-party provider in the year ahead. We believe this consolidation trend will be a core feature in the industry in 2024.  

Amid these challenges and changes, CFOs are making big changes to streamline their firm’s operational efficiency, fortify their cybersecurity ahead of forthcoming regulations, and naturally drive cost efficiency.  In this blog post, we’ll explore the pain points faced by CFOs, as reported in our 2023 survey series, and the solutions they’re implementing to navigate this ever-evolving technology and cybersecurity landscape. 

Key Challenges Confronting Hedge Fund CFOs 

1. Increased Cyberattacks: The surge in cyberattacks has undoubtedly been a significant pain point for hedge fund CFOs. Cybersecurity breaches can result in substantial financial losses, tarnished reputations, and potential legal consequences. 
2. Access to Regulatory Expertise: It can be quite challenging to know your cyber risks when it’s not your key area of expertise. More than half (53%) of the CFOs surveyed said they would be outsourcing their cybersecurity programs to improve their cyber posture, reduce business risk, and lower total costs—specifically insurance cost, according to our 2023 Hedge Fund Cybersecurity Report.  
3. Hybrid Workforce: The hybrid work model introduced complexities, making it crucial for IT and cybersecurity teams to collaborate closely. Over 50 percent of CFOs that responded to our cybersecurity survey acknowledged that hybrid environments require IT and cybersecurity to work as a single unit.  
4. Cost Concerns: As inflationary pressures and economic weaknesses persisted, according to our 2023 Hedge Fund Managed IT Report, 82 percent of CFOs reported increased outsourcing in response to the weak economy and inflation. Balancing the budget while enhancing cybersecurity and IT capabilities is an ongoing concern. 
5. Regulatory and Investor Pressure: CFOs are facing regulatory pressure (36%) to use an outside provider for annual risk testing, with investor pressure also being a notable factor, according to this year’s survey series. Regulators and investors are pushing for a higher level of independent validation for annual penetration testing and security risk assessments.   

CFOs’ Plot Changes in the Year Ahead 

1. Outsourcing Expertise: A significant shift is underway, as revealed in our 2023 Hedge Fund Cybersecurity Report, with 53 percent of CFOs planning to outsource to access industry-specific and regulatory expertise. Outsourcing can provide specialized knowledge and resources to navigate complex compliance requirements effectively.  
2. Consolidation of Services: 42 percent of CFOs that responded to our cybersecurity survey plan to consolidate cybersecurity and managed IT services with third-party providers. This move simplifies management and streamlines processes, improves cost efficiency, and ultimately improves your organization’s cyber posture. 
3. Exploring the Value of AI: A notable 47 percent of CFOs that responded to our managed IT survey are seeking providers that use artificial intelligence (AI) to resolve technical issues, reduce the number of cases, and enhance service delivery. AI-driven solutions can help address IT and cybersecurity challenges more efficiently. 
4. Upgrading Service Providers: In our managed IT survey, every CFO who took part expressed their clear intent to transition to new MSPs within the next two years. Having the right coverage is essential for responding swiftly when bad actors get access to an environment. Combining managed IT and cybersecurity into a unified approach proves more effective in promptly addressing security threats, ensuring your firm’s safety and uninterrupted operations. 
5. Separating Annual Testing for Core Cyber Programs: CFOs have begun separating annual risk testing from their core cyber programs and are looking to establish a full bench of risk testers to cycle through. This move is allowing them to continue to pursue vendor consolidation for the reasons listed above, while also meeting growing regulatory and investor demands for independent testing. 

Parting Insights  

As the CFO, you bear a large part of the responsibility of ensuring that your managed IT and cybersecurity service providers deliver secure, reliable, and resilient services to your team, and you need that to happen at a cost-effective price point. Simultaneously, you must navigate the intricate terrain of ever-changing business, market, regulatory, and economic dynamics. Your role places you at the nexus of your firm’s financial and operational health, and your decisions play a key role in shaping the future of your firm’s success.   

In our interactions with CFOs, a distinct preference has emerged for the simplicity of working with a single vendor to optimize system performance, firm security, and financial ROI. Drawing upon our extensive experience as an integrated Managed IT and Cybersecurity MSP spanning over a decade, we are dedicated to facilitating your journey, ensuring you remain at the forefront of this trend while circumventing the bottlenecks that come from juggling multiple disparate vendors.   

Drive Your Organization Through a New Era of Financial and Digital Transformation 

Agio can guide you through the transition from perceiving cybersecurity as a mere compliance matter to recognizing it as a fundamental component of cyber risk management. Are you ready to elevate your security measures? Let’s get in touch.