Robert Rutherford, CEO of the business and technical consultancy QuoStar
New FCA guidelines have given UK-based financial firms the green light to utilise cloud-based IT solutions, without fear of breaking any regulatory rules. This follows the regulator’s announcement that there is “no fundamental reason” why financial services firms cannot implement cloud services.
These latest guidelines have effectively given firms the go-ahead to pursue cloud services as a basis for their outsourcing strategies. However, the guidance also states that firms are required to ensure that cloud providers store their data in suitable jurisdictions. As such, it will be vital for firms to understand their cloud providers’data residency policies before storage can begin.
The benefits of cloud computing
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Despite these guidelines now being in place, many firms across the financial services sector are still puzzled as to how the cloud can work for them and for their industry. The most predominant three reasons for rejecting other IT infrastructures in favour of the cloud are the flexibility, scalability, and availability it offers. Firms of any size, with any number of employees can use the cloud – and this can be scaled up, or down,according to the needs of a firm throughout its corporate lifecycle.
This flexibility is especially important in cases where two firms merge, or one acquires the other. According to Thomson Reuters, recent figures indicate a post-Brexit increase in M&A activity in The City. Firms across a variety of sectors are deciding that now is the time to strategically merge, or agree to an acquisition by a larger organisation.
In such scenarios, firms will typically see the number and locations of their employees increasing dramatically. Cloud providers can offer a scaling up of service,which allows for delivery of IT solutions to the new team or transitional systems, usually instantly.
Another key area where the cloud offers significant value to the sector is for business continuity. The cost of running a continuity solution in the cloud versus the traditional stand-by solutions is considerable, especially when considering the systems can be mirrored, meaning a near 0 downtime scenario for key systems or all systems. The vast majority of cloud providers will allow a firm to dictate where its data is stored, replicated and backed up, which will ensure compliance with FCA’s guidelines regarding jurisdictional data storage, even in the event of a server failure.
Are security concerns still legitimate?
Misconceptions still linger in terms of the security of cloud computing. Generally speaking, the cloud offers superior security in comparison to internal IT infrastructure, despite a large percentage of the financial industry still opting for the latter.
The truth is that most data breaches actually take place in on-site data centres, yet some firms still believe that local data storage is more secure. Any of the risks posed by the cloud are not actually linked to the cloud itself, but the security of the provider.
A necessary level of due-diligence is therefore required, so that firms can ensure that their cloud provider has a sufficient levels of security to keep their data safe.
It’s important to not forget that the ultimate responsibility of data is with the firm. Firms need to undertake regular assessments and ensure that suitable controls are applied in order to keep their data secure.In short the providers need to be audited to ensure that regulatory obligations are met.
What makes the financial sector special?
The level of regulatory compliance that third-party providers must adhere to is at a higher level for the financial services sector than any other. As a result, ‘off the shelf’ solutions are typically unsuitable for firms operating in this the industry.
By comparison, more niche providers can enhance a firm’s delivery of IT service significantly.Conducting research in to the more specialist solutions is therefore important. Financial firms will be able to benefit from a provider which understands their specific requirements and their needs, so that it can ensure a consistent service around the clock.
Many firms remain reluctant to move to the cloud as they do not recognise how it might help their business, despite the benefits being plain to see. It should be remembered that the term cloud is extremely broad, and so should not be rejected outright based on misconceptions and generalisations.
In addition to the greater flexibility, scalability, availability and control that it offers, the cloud allows a firm’s internal IT team to prioritise its business change projects, rather than concentrating on the day to day of ‘keeping the lights on’. With such clear advantages, and the green light from the FCA, financial services should be looking at cloud options when planning their infrastructure budgets for the next quarter.