The Cloud is no longer an emerging trend, it is a reality, it is an essential tool for financial institutions to remain competitive in today’s difficult business environment. Cloud computing depends on how effective the reorganization of processes can be and what success digitalization brings with new technologies such as artificial intelligence. Recently the regulators have also started encouraging banks to use cloud services more widely. At the same time, they emphasized that banks cannot give up their responsibility for outsourced IT services.
Risk management and opportunities in cloud
A comprehensive Deloitte report “Getting cloud right – How can banks stay ahead of the curve?” provides financial institutions with an independent perspective on the big questions about opportunities and risk management. However, based on practical experience, it also provides a high-level roadmap for cloud transformation. It shows the pitfalls that banks need to know when moving to the cloud. The report also provides tools to answer certain questions in IT:
- How can we take advantage of opportunities while reducing risks?
- How can we keep up with innovation without making costly mistakes?
- How do we survive and prosper in the cloud?
Every cloud transformation must begin with the definition of a “Cloud strategy”. It should be aligned with the company’s basic business strategy. This is then followed by the definition of risk management and governance requirements. A financial analysis also clarifies whether the investment is justified.
Which cloud service provider is suitable for a financial institution depends on the current and future operating model, your own service offerings and the desired delivery model (IaaS, PaaS or SaaS). It is recommended to create an assessment framework for the operating model and for the performance of potential cloud service providers that covers various aspects: regulatory aspects, compliance, cyber security and technological issues.
Using cloud services means changing your attitude in management. Organizations say goodbye to a do-it-yourself mentality and open up to external providers who offer scalable, flexible, faster and sometimes cheaper services. The cloud becomes an integral part of today’s service delivery model. It allows banks to take advantage of new market opportunities and open up new delivery channels. Many providers and banks are already pursuing a cloud-first strategy. Standardized cloud implementations are becoming the rule and on-premise implementations the exception.
There are also predictions that devices like Alexa, Siri and Google Home could represent the future of banking if they act as financial assistants in our everyday lives as AI bots. Siri would then be asked for financial advice: “Can I afford the new car now or would I better wait until next year?” It is vital for financial service providers to accept the cloud in a business environment in which innovation, disruption and competition force financial institutions to increase efficiency and agility and create new added value for customers.
Regulation, data security, the challenges of cloud transformation and the risks of outsourcing critical processes have so far prevented many banks from using cloud services. In order to support their customers in regulatory compliance, the major cloud service providers have meanwhile increased their worldwide physical presence. In some cases, this has solved the problems arising from the obligation to keep and store the data in the country of its collection.
Such transformation challenges can be overcome by following a structured approach to cloud adoption. Through a thorough risk assessment and a continued supplier management process, banks and asset managers are able to minimize data and third-party risks.