FFIEC’s recognition of cloud security advantages is good for modest financial orgs

Last month the Federal Financial Institutions Examination Council (FFIEC) shared an opinion on the viability and security of cloud computing. In the four-page statement, the interagency body empowered to prescribe uniform principles, standards, stated that cloud computing is “another form of outsourcing with the same basic risk characteristics and risk management requirements as traditional forms of outsourcing.”

What they are offering is a back-handed endorsement of cloud computing with the caveat that if you perform your due diligence and the solution passes the security smell test, there is no reason why a financial institution cannot enjoy the full scope of cloud based benefits.

Like most other industries on the planet, banks, credit unions, investment brokerages, hedge funds, title and mortgage companies, credit card enterprises outsource certain parts of their business for a variety of reasons. In some cases, it is a skill that is outside their core competencies like the physical transference of currency (armored cars). For others it incorporates economic and efficiency factors like reducing and controlling costs, expanding operational capacity, and employing best-of-breed philosophies. Regardless of the reasoning, outsourcing is an integral part of international business standards.

 “Outsourcing to a cloud service provider can be advantageous to financial institutions because of potential benefits such as cost reduction, flexibility, scalability, improved load balancing, and speed.” FFIEC Information Technology Subcommittee July 10, 2012

This is especially good news for credit unions and other smaller finance-centric enterprise organizations on the hook for compliance, heightened data and asset protection and access control   just like their multi-national brethren. In that the FFIEC has labeled cloud computing as an acceptable practice, I want to focus on three specific callouts that directly affect how and why security managed from the cloud (aka cloud-based security) fits with the strategic technology goals of any financial institution.

”I recall what a Network Apps Manager from Texas Capital Bank stated in a recent conference: “We get audited. We get audited a lot! In the span of a typical year we are audited by 6 different external and regulatory compliance groups.” I get dizzy just thinking of the constant drain on resources it takes to keep up with it all. Not to put a fine point on it, but just consider the manpower, reporting and computing  relief an organization can experience simply by outsourcing Identity Management to provision and de-provision users , customers and vendors…not to mention the additional control from SaaS Single Sign On.

And it’s no secret that global hackers have set their sites on American financial institutions but if you are running a credit union in Watertown, MN, do you need to fear nation-state cyber-terrorism? Probably not as much as Citibank, but shoring up your network perimeter is a must. Solutions like SIEM and Log Management have an excellent track record managed from the cloud. Other considerations such as careless third party users and employees, password mismanagement, poor vetting of third-party security protocols, access controls, must be addressed to achieve a true holistic approach strategy.  But for that credit union in Watertown or the title company in Carpenteria, CA there is limited budget to apply such an enterprise strategy. And that’s where cloud security comes in as a huge benefit. Security-as-a-service is typically a cash flow positive endeavor. This means there is no capital expenditures (it’s all OpEx) and there is no ROI lag time in terms of buying an expensive server or waiting 6 months to develop and deploy and appropriate program. Zero day deployment and pay-as-you-go scalability provide immediate return and immediate coverage.

Now this isn’t aimed so much at Bank of America or Goldman Sachs, but rather “Main Street” institutions who don’t have a spare $100K waiting to spend on on-premise servers, $1 million to develop and deploy a holistic security strategy and another $150K for dedicated analysts to monitor activity around the clock. Cloud-based security provides more functionality, greater scope, and greater manageability than a typical local institution can afford to do in house. Through multi-tenancy, economies of scope and leveraged enterprise best-of-breed expertise and capabilities, every financial institution can benefit from top-class security…as long as they do their homework!

As with any business decision, whether to migrate certain aspects of enterprise operation to the cloud, depends on several factors. Does it promote your strategic and tactical plans/goals? Have you done your homework and made sure both the vendor and the solution are a good (and trustworthy) fit? Does it provide ROI in a reasonable/expected time frame? Does the reward outpace the risk? Is the risk manageable? I could go on. But the argument is no longer be should I utilize the cloud. The better question is in what situations and how do cloud based solutions create benefit and advantages for my company?

Kevin Nikkhoo

CloudAccess.com

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