The introduction of cloud technologies in the banking sector is subject to various effects from compliance requirements and security standards. But how can the advantages of the cloud be optimally used, taking legal requirements into account? Financial institutions are faced with a dilemma: on the one hand, they should meet the call for flexibility, standardization, and speed by using new technologies such as cloud services to achieve business goals and increase customer satisfaction. On the other hand, they are faced with regulatory and safety requirements that cannot be met. What to do?
Cloud or not? Many banks and financial service providers are currently concerned with whether cloud-based services or systems represent a sensible and feasible addition or even an alternative for modernizing their existing legacy systems. A frequent driver is a necessary connection to front-end or customer data systems such as CRM or analytics, which are now often only available in the cloud as Platform-as-a-Service (PaaS) or Software-as-a-Service (SaaS).
Drivers Of Cloud Adoption And The Challenges Associated With It
“Standard” use cases in the HR or workplace area are popular candidates for the possible use of cloud-based services, as are specific technical innovations (e.g., AI or blockchain) that can only be obtained from the cloud in an economically sensible manner. Last but not least, the availability or loss of qualified resources for outdated systems or declining employer attractiveness can also be relevant aspects for dealing with cloud-native technologies.
The first banks are now using purely cloud-based core banking systems, and some financial institutions have even announced strategic partnerships with large cloud service providers (CSPs). This encourages many customers, users, and departments to demand higher speed and more flexibility in the provision of online customer services or interfaces. Likewise, internal application development often demands more agility and fewer hurdles in providing required resources. It can often report “secret” quick successes with small pilot projects as proof of success.
Fulfilling Regulatory Requirements Makes New Opportunities More Difficult
But the discussion as to whether and to what extent cloud-based platforms or infrastructures are helpful or suitable for the development of data storage is often slowed down or even nipped in the bud as soon as the current framework conditions concerning data protection from the perspective of risk management, controlling and auditing – perhaps even in an external audit, information security and regulatory compliance must be considered and assessed. The risks are usually tricky or inadequate to assess in the analysis and selection of possible cloud services.
The derived protection requirements for the data types to be used are high or very high, making outsourcing to the cloud seem impossible. Regulatory requirements concerning risk reporting in the context of outsourcing management, many organizations face high challenges and create question marks as soon as cloud services come into play.
How is the dilemma to be solved, which arises on the one hand from the need for flexibility, standardization, and speed to meet business goals and increase customer satisfaction, and on the other hand from regulatory requirements that seem to be non-fulfillable?
The Start Of A Cloud Journey
In practice, it has proven to be a viable option first to identify the possible risks, potential hazards, and protection requirements at the level of specific use cases, taking into account cloud risk controls and standards identify and evaluate. The next step is to mitigate the protection needs with suitable technical and organizational target protection measures (e.g., storage encryption, zero trust principle, choice of storage location/data center, and monitoring/logging mechanisms) and actively manage risks.
In addition, vendor audits are also possible, for example, as part of a “pooled audit” together with other institutions in the network. Any necessary acceptance of any residual risks rounds off the risk-based approach. When choosing the right cloud service provider, it is essential to derive and document the necessary selection criteria and the risk management measures taken, the latter, among other things, within the framework of the written rules and the information networks.
The use of cloud services must, in turn, meet all technical, organizational, regulatory, and financial requirements in terms of execution as well as monitoring, reporting, and emergency management within the framework of overarching governance (ideally orchestrated by a cloud competence center). All guidelines, measures, and control mechanisms should be documented in the course of a “cloud playbook” in the context of the cloud strategy, which in turn is anchored in the corporate strategy following regulatory requirements.
Conclusion: The Key To Cloud Success
Companies from the financial sector either start their cloud journey strategically to create the basis for a rule-compliant cloud operation, or they follow the necessary measures if tactical implementations have already “created facts.” The cloud potential is identified based on a cloud application readiness assessment, and applications are selected as lighthouse projects for cloud migration.
Risk awareness, transparency, communication, and governance are generally the key to maximum possible security and flexibility in selecting and implementing cloud-based use cases to achieve business and IT goals. In this way, banks can benefit from cloud technology’s speed and innovative strength while complying with regulations and security standards.
