The use of cloud services has increased over the last number of years and continues to rise as businesses everywhere accelerate their pursuit of increased digital capabilities. Jackie Hennessy and our Technology Risk team explain why cloud governance is vital for managing your cloud risk profile.
Cloud computing is often at the core of digital disruption today. While cloud computing comes with great benefits such as reduced costs, flexibility and scalability, it also introduces a unique risk profile including information security, data protection, service availability and increasing regulatory requirements.
Striking a balance between managing this risk and leveraging the power of cloud is crucial. Effective cloud governance, that promotes optimisation and does not create barriers for innovation, can help organisations strike this balance.
Key drivers of cloud services
Digitalisation and resilience are two of the key strategic pillars we see at many organisations. This reflects the rapidly advancing technological environment that we operate in, which was further accelerated by the pandemic.
The use of cloud to support these strategic objectives is key and the choice of a Cloud Service Provider (CSP) is becoming a strategic decision that needs to be carefully considered. It is important to understand some of the benefits (below) offered by cloud services to strike the balance between reaping the reward and managing the risk.
Benefits of cloud
- Reliability & availability: More reliable and available services.
- Security: Cloud Service Provider may have better security and technical controls.
- Flexibility: Provides real time resource sharing and the ability to access data from anywhere.
- Scalability: Ability to scale up and down without changes in overhead cost.
Navigating the key risks of cloud
These risks need to be governed and managed to ensure that your cloud technology is being used responsibly and in compliance with regulatory expectations. As a result, it is more important than ever to understand and mitigate these potential risks in order to safely leverage cloud computing. Your first step to determining your cloud risk exposure, is understanding the following six potential risk categories:
- People: Lack of available resources with the right skillset.
- Data security: Failure to implement sufficient and appropriate security controls to protect data and prevent data loss through unauthorised access.
- Compliance: Failure to meet regulatory compliance requirements (including across multiple jurisdictions).
- Operational: Failure to implement cloud processes, systems and controls that are aligned to current policies.
- Financial: Failure to perform proper Cloud Spend Management around unplanned spikes in transaction volume and traffic.
- Third party: Lack of third party oversight including failure to acknowledge increased risk of cloud vendor lock in, vendor unreliability and dependencies.
The challenges that you may face
Navigating these risks is no small challenge and you may face a variety of obstacles that you will need to overcome.
Key challenges of cloud
- Increasing number of cloud applications in use.
- Different controls and operating models to what is currently in place.
- Limited cloud maturity and skills.
- Difficulty embedding cloud controls across your organisation.
- No single ‘golden’ standard for cloud risk and controls.
Approaching cloud governance
Cloud governance bodies will be required to develop, monitor and evolve cloud governance over time by leveraging existing governance forums or establishing new ones to have responsibility for:
- Cloud governance – formulating initial cloud governance policies, monitoring compliance, and reviewing exceptions and proposed changes.
- Cloud operations – managing day-to-day cloud operations, service provision and related issues.
The approach to managing Cloud Service Providers (CSPs) should be formalised and include processes for:
- Ensuring CSP’s have adequate controls in place.
- Onboarding and offboarding of cloud services from CSPs.
- Monitoring of performance in line with Service Level Agreements (SLAs).
- Oversight of outsourcing arrangements carried out by CSPs (i.e. sub outsourcing).
- Ensuring exit strategies are in place for termination of services (both expected and unexpected).
A cloud strategy should be developed, or at least, be considered as part of the technology and outsourcing strategies. The cloud strategy will need to remain aligned to the strategic objectives of the business and be reviewed and updated on a periodic basis.
Your data privacy and security policies and processes should be updated to consider the use of cloud and additional controls that may need to be implemented as a result of this, such as:
- Sensitive data ownership and classification.
- Data flows and requirements for data transfer.
- Data loss prevention and rights management for cloud data at rest, in transit and in use.
Mechanisms should be put in place to ensure ongoing availability of resources with the right expertise and skill set.
Cloud policies and processes should be developed to define how cloud is managed and monitored. These policies and processes should be communicated to appropriate stakeholders across your organisation to support ongoing compliance.
Regulatory horizon scanning mechanisms should be in place to identify the regulatory compliance landscape and expectations for cloud services relevant to your organisation. This may include the implications of using cloud in relation to General Data Protection Regulation (GDPR) and Network and Information Security (NIS) Directive); financial services regulations in relation to ICT and outsourcing; or more specific cloud regulations such as EIOPA Cloud Outsourcing for the insurance industry.
The KPMG Cloud Risk Framework
We have helped clients effectively manage risks across the technology risk landscape as it has evolved significantly over the last number of years.
KPMG have developed a Cloud Risk Framework to help clients understand, mitigate and effectively manage risks in the cloud. This covers assessing cloud related risks along with assessing governance, operating models and tools to strike the balance between the risk and creating business value.
Get in touch
If you are considering the use of cloud technologies in your business, get in touch with our Technology Risk team.
We have strong technical capability in the development of risk management frameworks, risk identification and assessment, performing regulatory compliance gap analyses, as well as reviewing, designing and implementing IT controls.
Contact Jackie Hennessy to start exploring how you can benefit from cloud technology, while protecting your business from the associated risks.