Robert Rutherford, CEO of the business and technical consultancy QuoStar
Financial services firms operating in the UK are now able to utilise cloud-based IT solutions without fear of breaking their regulatory obligations, as the FCA has said that there is “no fundamental reason” why firms cannot implement cloud services.
Whilst these are guidelines rather than rules, the FCA has advised firms to take note of them and use them as a basis for their outsourcing strategies. One element of this guidance which bears noting is that firms should ensure that cloud providers store any data relating to their organisation in data centres situated in suitable jurisdictions. In essence, the FCA still needs an oversight of any data relating to financial services firms and as such, advises that a data residency policy must be agreed with the cloud provider before commencing with any storage.
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 silver linings of cloud computing
The benefits of using cloud solutions for finance-based firms are no different to those in accountancy, law, or even media. The predominant reasons for utilising the cloud over other IT infrastructures are its flexibility, scalability and availability. In simpler terms, a firm of any size, with any number of employees can use the cloud, and this can be scaled up or scaled back to fit the future needs of a firm as it goes through its corporate lifecycle.
Recent figures from Thomson Reuters have indicated that the level of M&A activity in The City is strong post-Brexit, meaning that firms across a variety of sectors are deciding that now is the time to strategically merge their business, or be acquired by a larger organisation. In these scenarios, some form of private cloud based IT infrastructure is often a perfect solution. If a firm finds itself suddenly with a far greater number of employees and locations, its cloud service provider can simply scale up their service to deliver IT to the new team , typically instantly.
Cloud computing also offers a robust solution to prevent the impact on business operations should a server or another IT delivery platform fail. By their very nature, cloud service providers must be able to transfer data to an alternative platform in case of an outage. The vast majority of cloud providers will allow a firm to dictate where its data is stored, replicated and backed up, meaning that the FCA’s guidelines regarding jurisdictional data storage will remain adhered do in the event of a server failure.
Why security risks are a thing of the past
The risks posed by cloud computing are not linked to the cloud itself, but rather the security of a cloud provider. Security is yet another area where misconceptions linger. Some firms still believe that the cloud is less secure than having their data stored locally, when in fact most data breaches take place in on-site data centres.
As such, firms must conduct the necessary due-diligence to ensure that a cloud service provider has an appropriate level of security in place to keep their data safe. They must take ultimate responsibility, undertake assessments and apply suitable controls to ensure their data is secure.
There are also a number of security controls which firms can add to a cloud plan to further decrease any levels of risk, but in general terms, the cloud is more secure than running a legacy system internally, which is what a large percentage of the financial industry currently does.
The needs of the financial services sector vary from others due to the level of regulatory compliance which must be heeded by any third-party provider. This is where an ‘off the shelf’ solution will not be suitable for firms in this industry, and where more niche providers can enhance a firm’s delivery of IT service.
By conducting research into the more specialist solutions available, a firm will be able to benefit from a provider which understands its requirements and the need to ensure that service can be maintained around the clock.
Despite the clear benefits on offer, many firms have been reluctant to move to the cloud as they do not understand how it can help their business. The cloud comes in many forms and should not be dismissed due to a single all-encompassing name. Along with obvious benefits like greater flexibility, scalability, security and control, the cloud also allows a firm’s internal IT team to focus on business change projects, instead of concentrating on the day to day protection and storage of data.As a result, the advantages of using the cloud are clear, and with the FCA giving it the proverbial ‘thumbs up’, financial services firms must consider it as a viable option when considering their infrastructure budgets for the next quarter.