Updated September, 2024
Nearly every week I hear financial institutions talk about their cloud transformation strategy.
Although cloud adoption has moved to the forefront of many executive and board discussions, these initiatives should be balanced with a well-thought-out cybersecurity strategy to ensure secure migrations and ongoing operations.
Consider these five key factors driving cloud adoption to create a robust cybersecurity strategy, ensure secure migrations, and protect your financial institution and accountholders.
1. Cloud Ecosystem Maturity
Cloud computing has been around since the 1960s, although recent technological advancements have led to broader adoption.
Over the past decade, other pieces of the puzzle (aka “ecosystem”) have matured to enhance the value of the overall system. Cost-effective bandwidth and storage, increases in computing power (see Moore’s Law) offered by leveraging large computing environments, and advancements in IT infrastructure (routers, switches, and ubiquitous internet-enabled devices) have all enabled cloud adoption to come into its own.
Additionally, the advanced computing power of the cloud enables you to take advantage of advanced threat detection systems that were previously unobtainable for most financial institutions.
While the cloud brings significant benefits, it also introduces risks. You can combat these risks by conducting thorough due diligence on cloud providers’ security practices and better understanding your role in the shared responsibility model that forms the foundation of cloud computing.
2. Resilience
As the need to serve clients 24 hours a day, 365 days a year has become commonplace, a traditional in-house model will no longer suffice.
With accountholders expecting timely, convenient, and around-the-clock service, the FFIEC updated its guidance to reflect the new norm of near real-time recovery. Return Time Objectives (RTOs) represent the time needed to get your system back up and running after experiencing a service disruption. Whether driven by accountholder expectations or technological advancements, previously established RTOs that once allowed for several hours of downtime may now require near real-time recovery. Therefore, it may be appropriate for management to reevaluate your currently acceptable RTOs.
Moreover, an increasing number of examiners are using this as justification that financial institutions need to do more, and frequently expect near real-time recovery. This has led examiners to recommend institutions migrate to the cloud to enhance their resilience and meet modern recovery standards.
In response to increased regulatory scrutiny, financial institutions frequently look to the cloud for reprieve. According to McKinsey, moving to the cloud can significantly improve stability compared to on-premise environments. In addition to moving your servers to the cloud, you can also effectively move your risk to the cloud depending on your cloud migration path and where you fall on the shared responsibility model.
3. Security
The frequency of cyberattacks continues to accelerate with increasing destructive impact.
According to the Cyberthreat Predictions for 2024 – An Annual Perspective by FortiGuard Labs, the volume of cyberattacks has skyrocketed, and adversaries are targeting critical infrastructures – including financial institutions – due to the substantial adverse impact on society. With the average cost of a data breach reaching $4.88 million in 2024, representing a 10% increase over last year, the stakes have never been higher.
As the threat landscape continues to evolve, your strategy for mitigating cyber risks must evolve with it.
One way you can improve your cybersecurity posture is by leveraging improved security offered through cloud platforms. Moving to a private cloud environment empowers you to keep pace with technological advancements, better manage compliance and costs, improve your cybersecurity posture, and strengthen disaster recovery capabilities.
4. Data and Analytics
Although protecting accountholder data has been an area of concern for years, the increased focus on using data and analytics to drive business decisions has illuminated the need for an effective data strategy.
This includes both a scalability perspective as well as an understanding of how data flows throughout the organization. Cloud platforms are well-designed to handle the heavy computing loads needed to perform advanced analytics while offering enhanced security capabilities. Additionally, cloud solutions provide significantly more flexibility to scale up and down than traditional in-house environments.
With auditors and examiners placing greater emphasis on data integration and resiliency, understanding where your data resides can help you develop an effective strategy for mitigating risks associated with your data.
5. Get Off the IT Hamster Wheel
With IT infrastructure needing to be continuously patched and updated to mitigate security risks and ensure optimal system performance, keeping up can be overwhelming.
This has led hundreds of financial institutions to migrate their servers to Jack Henry’s private cloud to leverage its advanced security measures, ensure consistent updates, and benefit from a scalable architecture tailored to each institutions specific needs – getting them off the “IT hamster wheel” of having to upgrade their server operating system and underlying hardware every few years.
Furthermore, the U.S. Department of The Treasury pointed out in their Cloud Report that general IT and cybersecurity skills don’t necessarily translate well to cloud environments, so additional, ongoing training has become table stakes to keep up.
When you consider the prevalence of sophisticated threats, limited resources, and increasingly complex environments, many banks and credit unions have come to the realization that the old way of doing things is no longer good enough. This has become even more evident as supply chain dependencies have become commonplace.
Learn more about reducing risk and fraud at Jack Henry.
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