Financial Institutions and Cloud Storage
The accelerated development in the comprehension and availability of cloud computing services, inclusive of on demand and scalable IT services offered through the internet; provide considerable number of opportunities for the users and hosts of cloud computing alike. For those of you who are thinking about using the cloud for your storage needs, you will be offered with several advantages, which include flexibility in deployment, considerable amount of operational efficiencies and cost savings, instant access to data and applications, system, much better backup services, and an even more responsive and faster upgrade functionalities.
Prospective hosts of cloud storage services, such as some of the leading information technology service providers, are aware of the definite business opportunities they obtain from the same, while prospective users of cloud storage services realize the efficiencies of cost as well as business and technological flexibility they can obtain from cloud based storage solutions. Due to this reason, the demand for, and the interest in, cloud based storage services has seen a dramatic increase especially in the past couple of years.
The Interest of Financial Firms in the Cloud
Several organizations that offer financial services, such as banks, insurance companies, asset management firms, and security solutions firms, top the list of those organizations that look at the considerable amount of potential benefits they would receive from a cloud based storage service. There are several banking firms and also various other financial services institutions that are closely analyzing the various benefits associated with using a cloud storage service, and therefore a lot of leading Technology Service Providers (TSPs) are working on establishing cloud storage systems with the main aim of attracting financial services organizations.
However, for those regulated organizations such as investment banks, money managers, and banks that may feel desirous to transfer a part or whole of their IT infrastructure to the cloud, there are various vital regulatory and legal challenges to be considered and cleared up before they actually start with the process.
Difference in Issues
Cloud computing or cloud storage is basically an information technology delivery model that includes a wide variety of IT or business activities and processes, and the problems encountered by financial organizations will be greatly influenced by the scope and nature of all the activities of cloud computing that are being foreseen. With the help of cloud based storage services, all users, inclusive of financial services firms, can completely outsource a part or all of their operating platforms and systems (PaaS – Platform as a Service), information technology hardware architecture (IaaS – Infrastructure as a Service), or even their software applications (SaaS – Software as a Service) according to their individual preferences.
In addition, there are several methods from which financial organizations can choose to get their services delivered. Such methods include: Public clouds, in which the delivery of all required IT services to several customers is made entirely in utility style by making use of procedures, methods and materials that are totally non-customized; Private clouds, in which all the different IT services offered are profoundly customized to cater the preferences or needs of an individual firm or a small group of firms by making use of chosen procedures, methods and materials; and Hybrid clouds, which is basically a mixture of the previous two types.
As the choices are very much distinguished, the different solutions and challenges encountered by financial services firms will differ greatly. For instance, the challenges encountered by a small community bank will be completely different from those experienced by a global banking firm. Hence, the cloud based storage service you choose must be able to meet all your requirements and still provide you with all the necessary solutions you would need when encountering such challenges.
Legal and Regulatory Landscape
If you are a regulated financial institution, you probably would have spent much time thinking about the various issues you will have to encounter and would have identified multiple concerns you will have to address before you actually start to use a cloud based storage service. Some of those primary concerns include the security of your systems and data, data privacy, contingency planning, business continuity, and concerns related to risk or liability management. There are clear-cut expectations for the Federal banking agencies when it comes to regulated financial institutions deciding to outsource their technology services to a TSP. Their main focus, from the regulatory point of view, tends to be on compliance and operational risk.
When it comes to operational risk, regulators mainly focus on such risks emerging from:
- the scope and nature, such as the sensitivity of data, volume of outsourced transactions, and criticality of service, of the services and functions outsourced by the financial services firm,
- the service provider, inclusive of its stability and financial condition, usage of technology platforms, MIS and reporting capabilities, related experience, capabilities of business continuity and much more, and
- the kind of technology that is used in offering the services, such as its security, scalability and reliability.
Similarly, when it comes to compliance risk, the main focus of regulators tends to be around the privacy, security and integrity issues of data, and also the ability and willingness of the TSP to comply, and help the financial services firm in complying with the regulatory and legal standards to which it is applicable. Hence, it is important that you perform enough research and comparison before choosing the cloud storage provider you wish to use, in order to make sure that the particular provider meets with and helps your firm to meet with all the regulatory and legal compliance factors discussed above.
In addition, the cloud based service provider you choose must also assist you in overcoming the various issues and challenges pertinent to your financial privacy, customer data protection, and business continuity.