Beyond the Target: Critical Cybersecurity Controls to Mitigate Third-Party Risk in Private Capital

Threats to investment funds

The investment landscape has been defined by three major, ongoing cyber trends in 2024/2025 that directly impact risk and valuation for Private Equity (PE) and Private Lending firms:

• Supply Chain Systemic Risk: The Verizon DBIR 2025 reports that 30% of breaches now involve a third party. This threat was acutely felt recently when a ransomware attack against a major IT management firm compromised data for approximately 20 different PE firms, proving that security is a systemic risk that cascades across the entire investment network.

• AI-Enhanced Attacks: Threat actors are using Generative AI (GenAI) to automate reconnaissance and create highly convincing attacks, including Deepfakes and advanced Vishing (voice phishing) to impersonate senior executives and authorize fraudulent wire transfers.

• Regulatory Pressure: The SEC's new rules mandate rapid disclosure of material cyber incidents and require public reporting of firms' cybersecurity risk management and governance, effectively making cyber resilience a fiduciary and board-level issue.

  
  

The solution to these evolving threats is the strategic implementation of robust cybersecurity controls across your fund and portfolio.

Governance & Contractual Controls: Setting the Bar

To combat systemic third-party risk, security must be baked into the vendor selection and M&A contract process.

Control	Actionable Implementation for PE/PL	Addresses Threat
Contractual Security Requirements	Mandate specific NIST or CIS controls for Tier 1 vendors (MSPs, cloud providers). Contracts must include strict, rapid incident notification timelines (e.g., 24-48 hours) and liability provisions.	Supply Chain Risk
Right-to-Audit & Assurance	Require annual SOC 2 Type II reports or allow independent, third-party penetration testing of the vendor's environment.	Supply Chain Risk
SEC Compliance Mapping	Conduct pre-acquisition diligence that specifically maps the target company's controls against required SEC mandates. This validates or flags compliance risk immediately.	Regulatory Pressure

Technical Access Controls: Limiting the Blast Radius

If a vendor or employee is breached, these controls prevent the attack from spreading across the fund or portfolio.

• Mandatory Multi-Factor Authentication (MFA): Enforce MFA across all systems (fund, portfolio, and vendor access), especially for email and privileged accounts. Compromised credentials are cited as a top root cause of ransomware attacks in the financial sector.

• Privileged Access Management (PAM): Use a PAM solution to manage all vendor administrator accounts. Access should be Just-in-Time (JIT) and session-recorded (all actions logged) for critical systems, ensuring vendor access automatically expires after the task is complete.

• Network Segmentation (Zero Trust): Logically divide the network into isolated zones. Implement Zero Trust Architecture (ZTA) principles to ensure that if a threat actor gains a foothold in one segment (e.g., a PortCo's marketing server), they cannot immediately jump to the fund’s confidential deal server.

• Immutability for Backups: Implement a "3-2-1" backup strategy with at least one copy being immutable (cannot be deleted or altered) and air-gapped (offline). This is the last line of defense against the dual-extortion model of modern ransomware.

Operational & Executive Controls: Real-Time Resilience

Control	Actionable Implementation for PE/PL	Addresses Threat
Phishing & Deepfake Training	Conduct high-frequency, targeted phishing simulations and training that focus on AI-generated voice/video scams (Deepfakes). Establish strict, non-circumventable voice verification protocols for all wire transfer authorizations.	AI-Enhanced Attacks
Security Monitoring (SIEM/EDR)	Deploy Endpoint Detection and Response (EDR) solutions across the fund and high-risk PortCos. The system must use behavioral analysis to detect and contain threats that slip past traditional defenses.	Ransomware, Supply Chain Risk
Tabletop Exercises	Conduct regular incident response tabletop exercises (IR TTEs) involving the executive team, legal counsel, and the board. Scenarios should focus on a third-party vendor breach or a material SEC disclosure event.	Regulatory Pressure, Supply Chain Risk
Executive Governance	Formally assign cyber risk oversight to a board committee and mandate monthly reporting on key risk indicators (KRIs) like patch compliance, access controls, and third-party monitoring status.	Regulatory Pressure

Conclusion

The modern threat landscape dictates that cybersecurity controls are fundamentally a business risk management tool. By moving beyond simple compliance checklists and strategically deploying these technical and governance controls, PE and Private Lending firms can transform third-party risk from an existential threat into a managed, quantifiable liability.

Stay Ahead of the Next Threat

Cybersecurity is constantly evolving, and so are the attackers. Stay informed with expert insights, best practices, and real-world threat updates from TAAUS Secure Technologies.

Sign-up for our newsletter or contact TAAUS Secure Technologies to schedule a consultation and protect your business before the next attack.