In February, hackers made headlines when about $1.5 billion worth of digital assets were stolen from a cryptocurrency exchange. The sum, eye watering by any measure, could be the biggest theft in history.

You might think a breach of this magnitude, which roiled crypto markets, had to involve some groundbreaking illicit technology or a bad actor on the inside. And yet, the New York Times reveals, the hack was relatively straightforward, identifying and targeting a glaring vulnerability in the exchange’s security. It turned out that the exchange was still using free third-party storage software, which lacked sufficiently robust security protocols to enable to the exchange to properly verify transactions.

To quote the Times: “the losses were ‘completely preventable,’ one security firm wrote in an analysis of the breach, arguing that it ‘should not have happened.’”

Everyone knows a chain is only as strong as its weakest link, but it’s all too easy to take your eye off the ball when the weak link is outside your organisation.

It’s not just a question of firewalls and encryption. There’s also the human element. Your own employees may take regular cybersecurity awareness training, but what about the employees at your technology providers?

At night all swans are black

Sophisticated investors are always concerned about tail risk, taking care to hedge against unforeseeable shocks and downturns.

But not all serious risks are unforeseeable, even if the relevant parties failed to see them.

The failure of Silicon Valley Bank (SVB) in 2023 is a recent case in point. SVB’s failure was, in the words of the Federal Reserve, “a textbook case of mismanagement by the bank. Its senior leadership failed to manage basic interest rate and liquidity risk.”

These risks weren’t hidden, they were hiding in plain sight. But, critics suggest, many of the bank’s high flying tech clients simply lacked the kind of effective treasury management that would have been de rigueur at any mature organisation. To borrow a pithy phrase from the Financial Times: “for all the effort they had put into raising cash, few had spent much time thinking about how to manage it”.

Though run by leaders with impressive technical skills and work ethic, SVB clients left themselves exposed to risks that, arguably, their management should have been anticipated.

No weak links

We’ve recently discussed the importance of integrated trading solutions, and the same principle applies when it comes to assessing risk. At Finalto, we provide our clients with the tools, expertise, and support they need to navigate volatility and secure their operations.

To ensure there are no weak links in our service, our risk, compliance, and liquidity teams work closely with our in-house technology specialists, delivering seamless and secure access to global markets. We provide the insight, service and data you need to make more informed decisions.

Finalto doesn’t do one size fits all. Get in touch with Finalto for a bespoke liquidity and technology solution designed to help your business meet its goals.

All opinions, news, research, analysis, prices or other information is provided as general market commentary and not as investment advice and all potential results discussed are not guaranteed to be achieved. The information may have been derived from publicly available sources, company reports, personal research, or surveys. Past performance is not indicative of future performance. Trading carries risk of capital loss. Service available to professional clients only