Cyber Resilience—Delivering through Disruption
IMF News, January 17, 2023
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- Published: January 17, 2023
Overview
- Sixth annual Cybersecurity Workshop held in person at IMF head office in Washington, D.C., after a gap of two years when the pandemic forced virtual meetings.
- Participation: almost 90 in-person participants and a similar number of online ones from over 60 countries.
- Key questions framing the workshop:
- What key lessons can be drawn from recent geopolitical conflicts?
- What cybersecurity challenges could arise as new forms of money and technology alter the financial landscape?
- How can we foster effective regulation and supervision of cyber risks, and achieve operational and cyber resilience to ensure delivery of critical financial services during disruptions?
Lessons from recent geopolitical conflicts
- Findings:
- Disputes not settled through diplomacy can deteriorate into wars—including in cyberspace.
- Modern warfare increasingly goes online, raising the likelihood of cyber-attacks that use state-of-the-art technology.
- Cyber-attacks often spillover and generate a much broader impact than originally intended.
- Perpetrators and motivations are often obscure; attacks can target commercial, government, or military systems.
- Recent incidents show hackers can cripple critical infrastructure: electricity, water, telecommunications, and transportation.
- Third-party service providers in complex supply chains can also be disrupted.
- The financial sector remains a target of choice for criminal gangs and other attackers.
- Implication for financial sector resilience:
- Critical infrastructure includes systems for clearing, settling, or recording payments, securities, derivatives, or other financial transactions.
- Given systemic importance, these operations are subject to a high degree of oversight to ensure safety and efficiency.
- Preparedness is key across attack types including phishing, supply chain attacks, and ransomware.
Cybersecurity challenges from the transformation of the financial landscape
- Findings:
- Fintech and new/emerging forms of digital money and finance bring both financial stability benefits and risks that must be weighed.
- Greater digitalization widens the attack surface as more systems and devices connect and depend on software.
- Interconnectedness poses challenges for financial stability.
- Adoption of newer technologies and dependence on third and fourth parties create emerging concentrations of technology, vendors, and service providers that assume systemic proportions.
- There is a window of vulnerability due to delays between discovering and patching security bugs; when bad actors find bugs first, major disruptions can occur.
- Recent incidents include hacking of cryptocurrency exchanges, demonstrating operational and financial risks from rapid theft and movement of crypto assets.
- Cybersecurity is a precondition for issuance of central bank digital currencies to protect integrity, privacy, and finality of payments.
Effective regulation, supervision, and IMF initiatives
- Observations and policy developments:
- IMF contributes to international fora, including the Financial Stability Board, on policy developments for the financial sector.
- Efforts underway to harmonize regulatory reporting of cyber incidents to promote fast response and recovery and protect financial stability.
- International standard-setting bodies prioritize operational and cyber resilience across institutions, markets, and infrastructures, establishing expectations for continuity of critical business services through disruption.
- Shortcomings exist in cyber resilience of financial market infrastructures, including gaps in response and recovery times under extreme cyber-attack scenarios and testing arrangements.
- IMF surveillance and capacity development:
- Formal assessments of cybersecurity risk supervision and oversight help monitor developments and strengthen policy frameworks across member countries.
- In 2020, the IMF began to include assessment of cybersecurity risk as part of its Financial Sector Assessment Program (FSAP) for selected jurisdictions.
- This complements and deepens assessment of operational risks in the banking sector and underlying financial market infrastructures.
- Capacity development activities include annual cybersecurity workshops, online tools to enhance knowledge and skills on cybersecurity, regional workshops training officials, and bilateral technical assistance focused on developing and strengthening cybersecurity regulations and supervisory frameworks.
Conclusions and recommendations
- Conclusions:
- Achieving operational and cyber resilience in the face of disruptions will be a key challenge.
- Geopolitical conflicts can and have spilled over into cyberspace, generating cyber-attacks.
- Structural transformation of the financial landscape creates new opportunities and risks, including for cybersecurity.
- Effective regulation and supervision of cyber risks and achievement of cyber resilience will depend on international collaboration, information sharing, cooperation among relevant authorities, and commitment to work together.
- Final recommendation:
- A collective effort is needed to bolster cyber resilience; workshops and international cooperation are expected to contribute toward that direction.
Source: Cyber Resilience—Delivering through Disruption; Tobias Adrian; January 17, 2023.