Why intelligence-led approaches are essential to meet rising threats, regulatory demands and investor expectations.

The alternative investment industry is entering a new era of scrutiny. Regulators, investors and counterparties are paying closer attention to how firms manage operational risk, and cybersecurity sits at the heart of that conversation. Threat actors have grown increasingly sophisticated, targeting firms not only for financial data but also for sensitive investor and portfolio information.

For managers, operational due diligence questionnaires now include detailed sections on cybersecurity posture. The questions no longer ask whether a policy exists, but whether it is tested, independently validated and benchmarked. Regulators, meanwhile, are moving from principles to prescriptive requirements.

In this environment, compliance alone is insufficient. Firms that rely solely on meeting the minimum threshold risk falling behind. It is intelligence - the ability to interpret risks, contextualise findings, and demonstrate resilience - that increasingly separates managers who simply check boxes from those who win investor confidence.

The evolving cyber threat landscape

Cybercrime is projected to cost the global economy US$10.5 trillion annually by 2025 (Cybersecurity Ventures), making it one of the largest ‘shadow economies’ in the world. Within financial services, ransomware and phishing remain the most prevalent threats, with nearly 60% of organisations reporting ransomware attacks in 2024, of which 70% resulted in data encryption (Integrity360, 2025).

Alternative investment firms are not immune. In fact, their unique profile - lean teams, highly valuable data, and reliance on third-party providers - makes them an attractive target. A single breach can disrupt trading, compromise investor trust, and trigger regulatory inquiries.

At the same time, the regulatory perimeter is expanding. In the United States, the Securities and Exchange Commission (SEC)’s new cyber disclosure rules require public companies to disclose material cybersecurity incidents within four business days and to provide detailed annual reporting on governance and risk management (SEC, 2024). The SEC’s cyber rule for investment advisers further demands written policies and procedures designed to address cybersecurity risks.

In Europe, the Digital Operational Resilience Act (DORA) came into effect in January 2025, mandating rigorous testing, third-party oversight, and operational resilience planning for financial institutions in the European Union (Proofpoint, 2025). The UK’s Financial Conduct Authority (FCA) has also made operational resilience a supervisory priority.

Overlay investor expectations onto this landscape, and the pressure becomes clear. Investors increasingly expect firms to demonstrate not just that controls exist, but that they are effective and comparable to peers.

The intelligence gap

Despite investing in security tools and audits, many firms struggle with what is known as the “intelligence gap.” They have data - scan results, penetration test reports, vendor attestations, and so on - but lack the ability to turn that data into meaningful insights for boards, investors or regulators.

For COOs and CTOs, this creates several pain points:

• Interpretation. Technical findings are difficult to translate into business impact, leaving boards uncertain about whether risks are material or theoretical.
• Prioritisation. Not every vulnerability carries equal weight, but without context firms can waste resources remediating low-severity issues while critical gaps remain.
• Validation. When managed service providers perform their own assessments, questions of independence arise. Investors increasingly want to know that the firm’s cyber posture has been evaluated by a credible, conflict-free party.
• Reporting fatigue. Different stakeholders demand different formats - regulators want technical detail, boards want concise summaries, and investors want benchmarks. Producing these consistently strains already lean compliance functions.

In short, the gap is not the absence of information but the absence of intelligence - and that can be just as dangerous as a missing control.

Towards cyber resilience, not just compliance

True resilience requires moving beyond one-off assessments or narrowly defined regulatory exercises. Cyber risk management should be integrated into a firm’s overall strategy, not treated as a siloed IT function.

An intelligence-driven approach offers several advantages. It provides clarity about which risks matter most, shows measurable progress over time, and situates a firm relative to its peers. This benchmarking element is increasingly vital, as investors ask not just whether a firm has met minimum standards, but whether it stands above the industry line.

Continuous monitoring and iterative improvement are also essential. Cyber threats evolve daily, while most regulatory examinations occur annually or less frequently. A static report produced once a year will always lag behind reality. Managers that embed resilience into ongoing operations can better anticipate changes and adapt more quickly.

For the alternative investment sector, strong cyber posture is becoming a differentiator. Firms that can demonstrate resilience win trust not only from regulators but also from current and prospective investors. And in competitive fundraising environments, that trust can translate directly into capital allocation decisions.
Practical steps for firms

So, the question is how can alternative investment managers close the intelligence gap and build resilience without overwhelming limited resources? Several practical steps stand out:

• Translate findings into board-ready insights. Avoid technical jargon and frame issues in terms of business impact. A vulnerability that could expose investor data should be described in those terms, not just as a misconfigured server.
• Benchmark against peers. Investors want to know whether a firm’s posture is average, lagging, or leading relative to its peer group. Independent benchmarks provide this context.
• Align compliance with real risk reduction. Regulatory frameworks such as the SEC’s cyber rules or DORA should not be treated as checklists. They should be mapped to practical controls that genuinely strengthen resilience.
• Seek independent oversight. Whether through third-party assessments or external advisory, independence helps avoid conflicts of interest and builds credibility with allocators.
• Track progress over time. Cybersecurity is a journey. Firms should establish metrics to show how posture improves year over year, rather than presenting the same static evidence at each diligence cycle.

It’s important to keep in mind that these steps do not eliminate the complexity of cyber risk, but they provide a framework for turning it into something more manageable - and more demonstrable.

Taken together, these measures reflect a broader shift in mindset: cyber resilience is no longer a technical exercise, but a strategic imperative that underpins trust, continuity and long-term value.

Securing the future of alternatives

Cyber threats are not abating; they are accelerating. The financial and reputational costs of inaction are rising, as are the expectations of regulators and investors. Alternative investment managers that continue to view cybersecurity as a compliance exercise risk being left behind.

By embracing intelligence-led approaches, firms can move from reactive to proactive, from box-ticking to resilience. This shift is not just about defending against attacks. It is about earning trust, protecting performance, and securing long-term growth in an industry where confidence is everything.