Over the last decade, cloud computing has gone from being an innovative concept into a must-have service for organisations in many industries. It offers endless possibilities in scalability, it is flexible and agile, and when implemented properly, boosts productivity and cost efficiencies.
Despite its popularity, banking institutions have been slow to adopt the technology. This is often due to the significant regulatory and security concerns, as well as migration challenges.
Banks are heavily regulated, to protect the financial sector as a whole and prevent the impact of economic instability on businesses and individuals. But with cloud computing, banks are now in a new arena of unregulated use.
Despite the fact cloud computing’s infrastructure is not governed by its own law, there are ways to make it a boon to the banking sector, such as putting in place necessary risk management. As we move towards a digital future, this may increasingly be what preserves banks from the unintended consequences of new legislation.
What is risk management?
Risk management is the process of identifying, assessing, and then mitigating threats to an organisation’s operations and earnings. IT risk management operates within that sphere, with a focus on digital technology which includes cloud security and cloud technology.
In any business that is data-driven, there are increased security risks, such as breaches of sensitive data. While cloud computing offers new ways for companies to grow and increase their profits, it also attracts malicious actors intent on stealing data or sensitive information.
To create a secure cloud environment, banks must ensure security measures such as continuous monitoring and early threat detection are in place. Financial services should also ensure they have a robust security strategy for their cloud service and develop a disaster recovery plan for potential threats being realised.
Security in the cloud
When it comes to the banking industry, the main focus is keeping data secure. Banking information is critically sensitive, which makes it both valuable and vulnerable. In Australia, cyber-attacks on the finance industry accounted for almost half of all cyber incidents
Cloud security is focused on the protection of data, applications, systems, and environments, to prevent against cyber threats such as unauthorised access, data leaks, service disruptions, malware and ransomware, theft, etc. Keeping data safe is possible in the cloud but the different types of security measures can affect performance, and affect cloud benefits such as search capabilities and data analytics.
This makes it necessary for a balance to be struck between security and usability of the cloud environment, by implementing the cloud infrastructure that best suits the needs for each specific situation and organisation. It is possible to run a private cloud in a bank’s own data centres while also using public cloud for backup and disaster recovery, as is integration with on premise data processing, and security access controls, to securely authenticate and connect all users.
Control over data in the cloud
Banks have been hesitant to adopt cloud computing due to concerns about lack of control, and wanting financial data to be secured with controlled access. Public clouds come with issues such as regulation, liability, location, and recoverability, which also reduces a bank’s ability to be agile and flexible to meet consumer demand.
As cloud computing has great potential to change the way banks and customers interact, migration to a suitable cloud computing model offers a number of benefits. The biggest hurdle to overcome is migration can be a time-consuming and complex effort, depending on the size of the bank and the underlying, existing infrastructure. Opting for migration to a private cloud gives banks increased control, more flexibility, and reduces the complexity of the system.
Regulation and compliance for cloud banking
The finance sector is a highly regulated one, both at a country and industry level. Data protection laws can dictate what options a bank has in regards to data storage and managing customer information. A major concern for banking executives is migrating to the cloud could result in heavy fines and negative publicity if it doesn’t meet the approval of regulators.
Financial watchdogs worldwide are concerned about service continuity, and banks ability to transition from cloud to their own database should a potential disruption happen. Other areas that are under consideration are how personal information can be stored, how it is used, and dependence on third party providers, particularly when it comes to financial data being mixed with other data on shared servers.
Cloud risk management
While cloud service providers take on some of the risk management responsibilities, accountability remains with the organisation who has adopted cloud computing. The operational risk management for banks therefore needs to take into account the particular issues that are associated with cloud computing.
Risk management is an essential part of banking, and with the increased reliance on digital technology and cloud migration, it is vital to have a robust strategy in place. IT service department capabilities and structure is also important to consider, to ensure the correct procedures and controls are in place to manage the cloud migration and services.
Take control of your financial institution’s future growth and partner with the cloud computing consultants at Steadfast Solutions. Their team of cloud engineers offers extensive experience and expert solutions for the finance sector, so you can have peace of mind your cloud computing risks are managed effectively.