From Russia with Love: Cyber war lessons for investment managers

Communications can be a dangerous minefield. This applies to investment management, but is especially true in politics, and infinitely more so, when campaigns butt up against spying, disinformation and cyber-attacks.

An earlier blog discussed ‘Marketing Tips for hedge funds from the Trump campaign’. In this blog, we intend to explore some of the communicative techniques that Russian President Vladimir Putin is alleged to have used to influence the US presidential election. We’ll also consider how President Trump might fight to regain the initiative and show how this applies to asset management firms.

The 2016 election

 

It’s reasonably clear that Russia used cyberwar techniques in a bid to sway public opinion. The US Office of the Director of National Intelligence (ODNI) confirmed in January that Russia did this through:

  • cyber-attacks on Democrat email accounts, and
  • spreading fake news on social media and Russian-sponsored news outlets.

These tactics turned out to be effective. But they were just props in a much broader communications strategy orchestrated by President Putin (and other countries) to target the stability of the west through digital guerrilla warfare.

It’s reasonably clear that Russia used cyberwar techniques in a bid to sway public opinion.

The effectiveness of the strategy is reflected in how long US intelligence agencies took to get to grips with it. Thus, only in April did the US publicly identify the Russian Institute for Strategic Studies (RISS) as the propagator of twin campaigns. The first: to influence Americans to elect a president with a softer line on Russia than Obama. And the second: to pursue a disinformation campaign alleging electoral fraud by Hillary Clinton when it looked likely she would win.

The Russian Institute for Strategic Studies is a government-backed think-tank that provides recommendations to the Russian President and Russian lawmakers.

A full-scale offensive

 

The multi-pronged nature of the Russian offensive encompassed the whole gamut of the digital propaganda ‘dark arts’ – ranging from fake news spread by automated bots to coordinated cyber-attacks. It built on a style of information warfare, or ‘dezinformatsiya’ which Russia has often used, but which has been in the arsenal of the UK, US, China and other countries.

Dezinformatsiyaterm apparently coined by Stalin after World War II which came into use in the early 1960s, and came into widespread use in the 1980s. A definition from the 1952 Great Soviet Encyclopedia called it the “dissemination (in the press, on the radio, etc.) of false reports intended to mislead public opinion

Of course, the disinformation campaign drew on leaks of Democratic party official emails. They are thought to have been passed along by Russian hackers such as Cozy Bear and Fancy Bear who look to be connected to Russia’s military intelligence apparatus.

In the classic style of disinformation campaigns, the leaks aimed to confuse the public and undermine the Democrat’s credibility. FBI director James Comey took the bait to reopen the Clinton email investigation just days before the election. Yet it emerged in May that Comey’s unusual decision was itself provoked by a Russian document.

This document turned out to be a fake memo – proving once again the value of disinformation in keeping opponents off-balance.  Though it turned out that Comey had quickly deemed the memo a fake, he made the announcement anyway in case it was leaked and undermined the FBI’s credibility!

Disinformation is unpredictable

 

The impact of his decision was massive as it likely cost Hillary Clinton the presidency. Yet if this is the point at which Russian intervention was most successful, then it implies that Mr. Putin succeeded as much because of luck as design. It would thus seem that multi-faceted disinformation campaigns may work, but often in ways that only become apparent after the fact.  

Yet if this is the point at which Russian intervention was most successful, then it implies that Mr. Putin succeeded as much because of luck as design.

Another strand of Mr. Putin’s influencing strategy – and potentially the most concerning for President Trump – is Russia’s cultivation of officials on the Republican team to advance Russian foreign policy and political goals. As the depth of Russia’s involvement has become clearer, a number of Trump campaign officials and advisers (including both his son Donald Jr. and son-in-law Jared Kushner) are under scrutiny for alleged dealings with Russia.

In late June, it emerged that Russian Ambassador to the US, Sergei Kisylak, is being recalled. His meetings with members of team Trump may yet foreshadow a scandal more serious than Watergate. Thinking of Kisylak as ‘the source’ for a new wave of leaks and disinformation is likely to set alarm bells ringing for the administration.

Trapped by events

From being an accomplished, emotive communicator, Trump has suddenly found himself on the back foot and reacting to events.

From being an accomplished, emotive communicator, Trump has suddenly found himself on the back foot and reacting to events. Mr. Putin’s deep expertise in intelligence gathering, counter intelligence, disinformation and propaganda matched with the cyber war capabilities of the Russian state are a formidable combination.

Sometimes investment managers face a similarly tricky confluence of forces. For example, a key portfolio manager suddenly quits. Or it could be that a fund’s performance dips noticeably or the firm is implicated in a rule breach by a regulator.

It’s evident that Trump (and the investment manager facing challenges) need to regain the initiative. But, how can this be done? One way to do so would be a communications strategy reboot.

Get in front of the story

 

To symbolise this Trump might, for example, anoint a new chief spokesman with a more winsome style. He might also develop a new, emotive story about Russia that both chimes with American attitudes and positions him firmly within those norms. Finally, he would use joined up communication – policy announcements, social media, digital ads and campaign-like events – to drive home his story.

Refresh the marketing message or the investor relations team. Formulate a compelling story about how the strategy has changed and what opportunities it will exploit.

The investment firm facing a sticky patch would take similar steps. Refresh the marketing message or the investor relations team. Formulate a compelling story about how the strategy has changed and what opportunities it will exploit. Use joined up communication – fund announcements, social media, PR, investor events and digital – to advance the story.

The object lesson of the Trump saga is that disinformation (or negative rumours about a fund), even erratically deployed, can have a formidable destabilising impact. Fighting back requires bold story-telling, planning, discipline and time.

 

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