Cloud Risk Management for Financial Services

Companies that provide financial services are wary about opting for cloud solutions, and they have good reason to be. There are too many security risks involved, and as services that cater to people and business entities, keeping their information private should be a priority. Amidst these stumbling blocks, implementing cloud in the finance sector need not be a challenge. When performed in accordance to the set guidelines for cloud risk management, such threats to security can be vastly minimized or rendered nil.

A Five-Step Approach to Cloud Risk Management

The Federal Financial Institutions Examination Council (FFIEC), a conglomerate that encompasses several regulatory bodies under the U.S. banking system, issued a recommended framework on the public use of cloud by financial utilities. Agencies belonging to the FFIEC have agreed that cloud poses the same risks as outsourcing, and should therefore be accompanied by a similar approach towards risk management which are as follows:

Data Management

Financial services are advised to continue practicing proper data management after outsourcing to cloud. Classifying and segregating data, as well as ensuring their recoverability, must be employed.

Auditing

Cloud services should cultivate transparency and uphold the regulator’s right to perform audits.

Data Security

A cloud provider is expected to employ data security measures which are complementary to the internal practices of a financial service.

Business Continuity

Every financial body is advised to create plans for business continuity. One of which is preparedness against data loss by planning data recoverability and emergency recovery in the event of an unexpected disaster.

Considerations

Cloud and financial services alike are required to observe laws and to consider legal and regulatory ramifications with regards to data security. The Gramm-Leach-Bliley Act, otherwise known as the GLB Act, must be implemented and followed religiously.

The GLB Act and Its Effects on Cloud Risk Management

The GLB Act specifies requirements for handling non-public personal information within a broad range of financial services. It is meant to protect the privacy of customers. The law states that the non-public, personal information of a customer should never be shared to third parties without an explicit consent. To further protect customers, both the financial utility and its outsourcing partner are required to implement comprehensive security programs that would secure the confidentiality of data and protect it from unauthorized access and anticipated security threats.

Outsourcing to cloud is a risky move for any financial institution, but the Gramm-Leach-Bliley Act includes guidelines which make transitioning easier. Together with the five-step approach discussed earlier, they effectively manage security risks associated with cloud.