The main cyber risks for financial institutions in 2025 include:

 Advanced Persistent Threats (APTs): Targeted, prolonged attacks aimed at stealing sensitive
data or disrupting operations.

 Ransomware: Highly targeted attacks demanding large ransoms, focusing on high-profile

financial organizations.

 Phishing and Social Engineering: Increasingly sophisticated campaigns, often enhanced by AI-
generated deepfakes, to deceive employees and gain unauthorized access.

 Supply Chain Attacks: Breaches via third-party vendors or service providers creating cascading
risks.

 Distributed Denial of Service (DDoS) Attacks: Disruption of services to cause operational

downtime.

 Cloud Security Vulnerabilities: Risks associated with hybrid or cloud infrastructures, including
data breaches and insecure access.

 Regulatory and Compliance Risks: Growing demands for data protection, privacy, and
transparent cybersecurity measures amidst evolving regulations globally.

 Insider Threats: Risks from employees or insiders mishandling or leaking sensitive information.

 Sophisticated AI/ML-enabled Attacks: Use of artificial intelligence by attackers to automate,

evade detection, or manipulate systems.

These cyber risks differ fundamentally from other traditional financial risks such as credit, market, or
operational risks:

 Dynamic and Evolving Threat Landscape: Cyber threats quickly adapt with new attack methods,
unlike more static traditional risks.

 Direct Threat to Confidentiality, Integrity, and Availability: Cyber risks target system security
and data breaches, causing operational disruptions and reputational damage beyond financial
loss.

 Interconnectedness: Due to reliance on digital technologies and third-party service providers,

cyber risks can cascade rapidly across networks and supply chains.

 Regulatory Scrutiny and Legal Liabilities: Cyber incidents expose institutions to regulatory
penalties and legal risks related to data breaches and non-compliance.

 Detection and Response Complexity: Cyber risks require continuous threat monitoring,
advanced technical defenses, and rapid incident response, which is distinct from many financial
risk mitigation measures.

Financial institutions must therefore prioritize enhanced cybersecurity strategies, investing in AI-
powered defenses, employee training, multi-factor and biometric authentication, risk assessment of
third parties, and resilience planning to effectively manage these unique cyber challenges in 2025 and
beyond.

In the UK context, the main cyber risks for financial institutions broadly align with global risks but have
particular regulatory and operational nuances:

1. Regulatory Compliance Pressure: UK financial institutions face intensifying regulatory

requirements for cyber resilience, such as the UK GDPR, Data Protection Act 2018, NIS
Regulations, and EU’s Digital Operational Resilience Act (DORA) that also impacts UK firms
operating in the EU. Compliance is a major challenge and driver of cyber maturity, with 44% of
UK financial services organizations citing it as a top cybersecurity challenge in 2025.

2. Readiness Gap for Emerging Threats: A 2025 report found many UK financial firms, including
those listed on the FTSE 350, are inadequately prepared for future cyber threats, with low levels
of hiring specialized talent and few mentioning future risks in reports. This exposes them to
advanced, evolving threats such as ransomware and sophisticated cyber attacks.

3. Increase in Cyber Incidents and Technology Failures: The UK's fintech sector is experiencing a
138% rise in technology outages, nearly 20% of which are cyber-related incidents. There is also a
critical gap between perceived and actual cybersecurity capabilities, especially concerning third-
party risk and change management failures.

4. Systemic Risk: Cyberattacks continue to be seen as a top systemic risk by UK financial

institutions, with 62% citing it as a key risk in the first half of 2025, reflecting concern about the
potential cascading effects on the broader financial system.

5. Supply Chain and Third-Party Risks: These attacks are especially difficult to mitigate and
respond to, often taking the longest to resolve. The UK’s Financial Conduct Authority (FCA) has
introduced new rules on third-party provider security to strengthen defenses in this area.

In summary, UK financial institutions must navigate complex and evolving cyber risks similar to global
trends but under heightened regulatory scrutiny and systemic risk concerns. The government and
regulators emphasize improving cyber resilience capabilities through compliance, readiness for
emerging threats, and managing third-party vulnerabilities, with deadlines such as 2035 for digital
system upgrades and 31 March 2025 for operational resilience compliance

In the contemporary UK financial sector, cyber risks represent one of the most significant and rapidly
evolving threats to institutional resilience and systemic stability. UK financial institutions face complex
cyber challenges including phishing, ransomware, data breaches, and state-sponsored attacks,
compounded by fast-moving technologies such as AI and quantum computing.
What distinguishes cyber risks from traditional financial risks (credit, market, operational) is their
dynamic nature and pervasive impact. Cyber threats are unpredictable, technologically sophisticated,
and can cause not only direct financial loss but also profound reputational damage, regulatory sanctions
(under UK GDPR, Data Protection Act 2018), and widespread operational disruption. These risks have
systemic implications, threatening the stability of the entire UK financial system.

The regulatory landscape in the UK imposes robust compliance obligations on financial institutions,
including adherence to the FCA, PRA, and emerging regimes like the Critical Third Party Oversight
Regime and the EU’s Digital Operational Resilience Act (DORA). This creates a challenging environment
requiring ongoing technological adaptation, specialized cyber expertise, and proactive governance
frameworks emphasizing board-level accountability and third-party risk management.

Moreover, the rise in fintech outages and cyber incidents—up 138% with nearly 20% cyber-related—
highlights operational fragilities and readiness gaps. Many UK firms remain underprepared for future
threats, lacking in cyber specialist recruitment and strategic foresight, underscoring the urgency for
enhanced cyber resilience across the sector.

In summary, UK financial institutions must integrate sophisticated, forward-looking cyber risk

management that transcends traditional approaches, aligning technological defenses with regulatory
mandates and systemic risk mitigation to protect the integrity and stability of the UK financial
ecosystem.