Strengthening cyber security: Why the Legal Entity Identifier (LEI) is becoming indispensable

30 joulukuun 2024

Digital transformation is rapidly changing the global economy, but it also brings with it growing risks. Cyberattacks are becoming more frequent and sophisticated and pose a serious threat to companies that rely on complex supply chains and digital networks. In this context, the Legal Entity Identifier (LEI) is coming into the spotlight as a crucial tool to ensure trust and security in digital ecosystems.

The growing threat of cyber attacks

Cybercriminals are increasingly targeting the financial sector, heavily dependent on external IT service providers. According to a report by the International Monetary Fund (IMF), cyberattacks on financial institutions have caused direct losses of over 12 billion dollars in the last 20 years. Since the COVID-19 pandemic, the number of such attacks has even doubled. This threat is growing in frequency and complexity, which poses challenges for companies and authorities alike.

Strong networking and dependence on a few large providers, for example, in cloud computing, increase the risk of far-reaching system failures. Therefore, it is essential that companies and supervisory authorities can clearly identify external service providers and better manage their risks.

The LEI: a global standard for greater transparency

This is where the Legal Entity Identifier (LEI) comes into play. The LEI is a globally unique identifier for companies that creates transparency and helps organisations monitor their supply chains better. The LEI offers several advantages:

clarity on corporate linkages

The LEI allows disclosure of complex corporate structures. Thus, financial institutions can recognise links between service providers and better assess potential risks.

efficient data integration

The LEI connects different data sources, such as commercial registers and financial institutions, enabling seamless integration and analysis.

automation and digital processes

Companies can easily integrate the LEI into existing systems thanks to modern digital tools and APIs. This saves time and minimises errors.

support for compliance and reporting

Using the LEI simplifies compliance with legal requirements and enables standardised reporting to all relevant parties in the event of incidents.

A global approach for greater security

The European Digital Operational Resilience Act (DORA) has already created a pioneering framework to regulate the financial sector’s dependence on IT service providers. However, this issue does not only affect banks and insurance companies: Other critical infrastructures such as healthcare, energy supply and the transport sector can also benefit from a standardised approach such as the LEI.

By establishing the LEI as a global standard, companies worldwide can strengthen their cyber resilience, better manage risks and promote trust in digital business models.