Responsible Cloud Computing

The Ultimate Guide for Financial Services Institutions and Their Ecosystem Partners on IBM Cloud Computing Technologies

This visual highlights the components required to shape the right cloud computing environment.

As we navigate times with increased uncertainties, financial services institutions face many challenges and opportunities as they determine the best capabilities to meet their customers’ needs. Adopting AI applications of cloud computing has become essential for businesses to remain competitive, and the urgency to deploy a responsible cloud computing strategy has grown exponentially.

In this comprehensive guide, we will delve into the real-world applications of responsible cloud computing for financial services institutions and those ecosystem partners that serve them daily to find those critical points of competitive advantage.

We will evaluate:

1. Why cloud computing is first about shared responsibilities.
2. What it takes to be responsible in the cloud.
3. What cloud computing types and servicing options are available today.
4. Why Artificial Intelligence and Machine Learning done right in the cloud is essential.
5. How to ensure business continuity in the cloud.
6. IBM Cloud for Financial Services.
7. Strategies and best practices for cloud adoption.

Financial services institutions are aware of the various types of cloud environments available to them to maintain a competitive edge. They also understand that deploying cloud infrastructures is first about sensitive client data and adaptation with international and regional regulatory frameworks, as they play an essential role in the successful and responsible adoption of the most effective cloud strategy.

IBM Cloud for Financial Services® is designed to address these concerns, helping financial institutions and ecosystem partners to transition to new cloud architectures while ensuring that security, compliance, resilience, and performance requirements are met.

Key Takeaways

• Responsible cloud computing strategies enable financial institutions to thrive in the digital age by enhancing security, privacy, agility, and scalability measures.
• Cloud computing requires trust and cooperation between the customer and its cloud providers to ensure that all the key roles are well considered and covered.
• Adopting a cloud strategy that encompasses risk mitigation and regulatory compliance while ensuring the deployment of new products and services is critical for long-term success.
• IBM Cloud for Financial Services includes security and controls built into the platform and offers comprehensive capabilities to help financial institutions accelerate and optimize their cloud adoption journey to support their business objectives.

Shared Responsibility in Cloud Computing

In the world of cloud computing, all stakeholders need to understand the concept of shared responsibility. The shared responsibility model delineates the tasks and obligations of cloud service providers and their customers when it comes to ensuring the security and compliance of the systems deployed and data used within the cloud environment. Organizations can better collaborate and create a more secure and efficient infrastructure by clearly defining these responsibilities.

But what do each party- the cloud provider and the customer — participate in? The cloud provider looks after supporting infrastructure (like hosting). At the same time, customers are responsible for leveraging those same resources into value-adding activities such as protecting networks or developing cost savings initiatives across different cloud services.

The Cloud Provider

The cloud provider is responsible for maintaining cloud infrastructure, security protocols, and overall service performance, including supervising the supply chain. By providing a variety of technology capabilities, policies, and controls to guarantee optimal protection against risks — thus assuring the company's objectives can be achieved — corporations may experience strengthened defense systems from these robust cloud offerings.

The Customer

Customers must safeguard their data and identities, both on-site and in the cloud. After all, the company’s value is within its data, making it critical that companies, regardless of size, take necessary security measures such as applying patches/updates, implementing access controls, and monitoring any suspicious activity. Each institution must also manage and secure applications and operating systems that are internally used.

There are several benefits to adopting a responsible cloud strategy. One key advantage is the ability to allocate resources effectively, which helps streamline operations, minimize costs, and avoid redundancies. Additionally, a responsible approach to cloud computing fosters a culture of accountability and trust among stakeholders, which, in turn, contributes to better overall security responsibilities and compliance requirements.

Choices for the financial services industry

When considering types of cloud environments for financial services institutions, there are typically three main options: Public, Private, and Hybrid. Each has its advantages depending on the institution's specific needs, security responsibilities, and available resources. For example, public cloud environments are often more cost-effective, but a private cloud can offer greater control and data security. On the other hand, a hybrid cloud environment can provide the best of both worlds, combining the scalability of a public cloud with the security and customization of a private cloud.

Essential cloud services in the age of digitization include Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS). These offerings streamline the deployment and management of resources, facilitate the development of a new generation of applications, and provide access to sophisticated tools, respectively. The advent of Artificial Intelligence and Machine Learning capabilities within cloud-native applications further amplifies the potential for organizations to innovate and scale their digital transformations.

IBM Cloud for Financial Services offers a secure, resilient, and high-performance cloud environment tailored to the needs of financial services institutions and is designed to help them address the industry's unique regulatory compliance requirements. By adopting best practices and strategies for responsible cloud adoption, institutions can successfully harness IBM's cloud offerings and unlock the full potential of their digital transformations.

Adopting a Responsible Cloud Computing Services Strategy

I am aware that adopting a responsible cloud strategy offers numerous benefits for financial services institutions and insurance providers, such as increased efficiency, cost savings, scalability, and improved access to innovative technologies like artificial intelligence (AI) and machine learning (ML) models. By leveraging these advantages, financial institutions can remain competitive despite the continuous evolution of digital technologies, tools, and systems.

Having worked with financial services institutions for over 25 years, and part of that time was when I was at IBM, I know that those institutions understand the importance of implementing multiple cloud computing services responsibly to optimize the agility and resilience of their business operations as well as reinforce their data security measures and compliance.

Enhanced Security Measures

Well-known cloud providers have implemented rigorous security measures to protect clients’ data, applications, and infrastructure from possible threats. This includes the use of encryption for extra safety, as well as providing additional protection at all threat monitoring levels — network layer, storage level, and application processes. All activities within a cloud environment are monitored closely to spot any suspicious behaviour. Companies must recognize the shared responsibility model between them and their chosen service provider when it comes to security. They must both take advantage of related features offered by these firms if they wish to maximize compliance rules while keeping their information safe. It is worth noting and highlighting this because no two businesses will face identical challenges in terms of protecting their assets through proper threat identification and management techniques. Each company should carefully evaluate which unique cloud service type may be applied.

Efficient Resource Allocation

Organizations can unlock the advantages of cloud computing and better manage their computing resources when they select an appropriate cloud environment. Automation training data mining, leveraging services exclusively available in a cloud setting, and keeping track of resource utilization are critical operational aspects that yield cost savings and improved performance, enhanced agility, and heightened security responsibilities.

The right resource combination allows companies to make the most out of multiple cloud computing services by embracing the most relevant options: providing secure customer experiences with reliable IT applications delivered securely through controlled access within each business's own dedicated networks instead of having large amounts spent just managing several isolated clouds with disparate sets up environments or dealing cumbersomely alongside numerous hardware components also stored across different locations. This scenario can exacerbate poor communications among distributed teams and on-premises resources operating under budget constraints, hoping to achieve agreed results.

Further, to maintain business continuity across digital channels, it is vital to consider regulatory advancements and corporate responsibility. By complying with governance standards and safeguarding sensitive data, finance and insurance companies can build trust among customers, ecosystem partners, and regulators.

IBM Cloud for Financial Services offers a series of components, architectural and implementation patterns, as well as consulting services that can help organizations mitigate risk, meet compliance requirements, and accelerate their cloud adoption. At the heart of the platform is the IBM Cloud® Framework for Financial Services, an industry-informed security and streamlined controls framework developed in collaboration with subject-matter experts in the IBM Financial Services Cloud Council to help financial institutions automate their security and compliance posture through a set of curated controls built directly into the platform. Designed to set a new standard for this compliance-conscious industry, the Framework aims to help financial institutions effectively address evolving best practices, laws, and regulations.

Cloud Environments for Financial Institutions

As a financial services institution exploring the cloud, it is essential to understand the various types of cloud environments available. In this section, we will discuss the benefits and uses of public cloud, private cloud, and hybrid cloud environments for financial institutions.

Public Cloud

A Public Cloud setup offers financial institutions access to shared cloud resources managed by the cloud provider. Public cloud services can be used on a pay-as-you-go basis, which helps reduce capital expenditure and offers flexibility in scaling as per corporate needs. However, with data and other assets being hosted on a shared platform, financial institutions must ensure stringent security measures are in place to avoid potential risks, such as lack of control or security issues, before opting for a public cloud service. Despite these drawbacks, many people choose this environment due to the relatively low costs associated with development environments, reduction of infrastructure costs, on-demand usage fees and ease of use provided across different types of cloud computing services. Many financial institutions are adopting public clouds to host non-critical applications, development environments, and data storage that do not contain sensitive information. An example of a popular public cloud includes IBM Cloud for Financial Services, IBM's industry-specific cloud platform and the world's first financial services-ready public cloud. Introduced in 2019, the platform is designed to accelerate financial institutions’ digital transformations with a focus on trust, achieved by placing security and resilience at the forefront. IBM Cloud embeds the same confidential computing security capability found in IBM z. Delivered via IBM Cloud Hyper Protect Crypto Services, the IBM confidential computing capability features 'Keep Your Own Key' encryption capabilities backed by elevated levels of security to help clients apply strict data access controls while still empowering them to leverage the benefits of the public cloud.

Private Cloud

A Private Cloud refers to the dedicated infrastructure and resources provisioned solely for one organization. In this environment, financial institutions maintain greater control over data, safety and security, and customization of the cloud platform. Private clouds generally operate on-premises or in a private, dedicated space within a data center, offering additional layers of security and privacy to protect sensitive workloads.

Financial institutions often choose private clouds for safety, to handle sensitive data and to help maintain compliance with strict financial services regulations. Though private clouds have higher initial costs than public clouds, they offer greater customization and control, making them ideal for institutions with specific needs and in-house expertise.

IBM Cloud for Financial Services provides critical security capabilities and compliance automation to help financial institutions confidently move sensitive workloads to a public cloud environment.

This includes end-to-end encryption, confidential computing, access management, and multi-zone regions for resiliency. The IBM Cloud Framework for Financial Services provides preconfigured controls aligned with industry regulations to help automate compliance. By leveraging IBM's industry expertise and security-focused private cloud platform, financial institutions can reduce risk when migrating critical workloads.

• Data protection: IBM Cloud for Financial Services offers end-to-end encryption with extensive control through capabilities like Keep Your Own Key (KYOK) and Hyper Protect Crypto Services. KYOK lets clients keep their encryption keys private in FIPS 140–2 Level 4 certified cloud hardware security modules (HSMs). This gives clients exclusive control over their data that not even IBM can access.
• Threat intelligence: IBM Cloud Security Advisor provides continuous security assessment, identifies misconfigurations, and enables remediation to help secure workloads. It can integrate with existing tools and feed data to IBM Security QRadar to help detect threats.
• Confidential computing: IBM Cloud for Financial Services leverages confidential computing capabilities like Intel SGX to help protect data in use. This allows clients to remove implicit trust in the underlying software stack and infrastructure.
• Compliance automation: The IBM Cloud Framework for Financial Services provides preconfigured security and compliance controls that help automate compliance posture. Clients can monitor compliance status on the IBM Cloud Security and Compliance Center dashboard.
• Access management: IBM Cloud for Financial Services incorporates multifactor authentication, privileged access management, and complete logging of administrator access. This helps address risks from privileged users.
• Resilience: IBM Cloud for Financial Services utilizes multi-zone regions to enhance business resiliency and disaster recovery across availability zones.
• Security services: Cloud Internet Services provide DDoS protection and web application security scanning. IBM Security Services can help manage security operations like Cloud Internet Services, which provide DDoS protection and web application security scanning.

Hybrid Cloud

A Hybrid Cloud environment combines the benefits of both public and private clouds, allowing financial institutions to leverage the best of both worlds. Institutions can decide which workloads are suited for public clouds and which should remain on their private clouds. This approach enables financial services organizations to prioritize security and compliance while taking advantage of public cloud services' scalability and cost benefits.

By adopting hybrid cloud environments, financial institutions can enhance their digital transformation journey while maintaining strict regulatory requirements. They can also develop and test applications more rapidly and adapt to changing market conditions. Still, the right combination of public, private, and hybrid cloud environments can enable financial services institutions to create a responsible cloud strategy that aligns with their unique business requirements, security responsibilities, and compliance needs.

There are many benefits when using the cloud. Still, as noted, awareness of the drawbacks makes for better strategy design and deployment. Drawbacks may include gaining complete control over your IT structure or being potentially vulnerable to security risks due to vendor lock-in. So, I will just say: make sure you understand what each cloud service offers before choosing one that works best for your business. Security, safety, and privacy should always come first when considering deploying such solutions.

Key Cloud Computing Services in Digitization

As stated previously, when considering responsible cloud design, we must evaluate security, safety, and privacy criteria. In times of accelerated digitization, financial institutions also require robust and flexible cloud services that address their bespoke needs and those of their customers. Let's review a few examples of these goal-driven critical cloud services.

Infrastructure as a Service (IaaS)

Firstly, using Infrastructure as a Service (IaaS) is critical for financial institutions to build a foundation for their cloud journey. IaaS provides virtualized computing resources over the internet, which allows institutions to scale their environments on-demand at an affordable cost, reduce operational overhead and maintain focus on their core activities. This type of service model also lets businesses select the cloud computing services they need without managing or setting up servers. For example, IBM's Cloud for Financial Services offers IaaS with built-in security and compliance controls to streamline risk management and support regulatory compliance. Thanks to this service model, companies don't have to worry about onsite infrastructure. Instead, they can overcome regulatory barriers that impede modernization and gain confidence that they are demonstrating regulatory compliance, allowing them to focus more energy on differentiating and driving innovation for clients.

Platform as a Service (PaaS)

Another essential service is Platform as a Service (PaaS), which enables financial institutions to develop, run, and manage applications without the complexity of building and maintaining their underlying infrastructure. PaaS models provide access to advanced tools and frameworks that enable rapid application development and seamless integration with other cloud-native services. The cost is minimized while quickening up the application creation process, allowing developers to dedicate their time to writing code that generates creative solutions instead of concerning themselves with technical details. The IBM Cloud supports Red Hat OpenShift, which helps accelerate innovation by providing a bridge between traditional applications and cloud-native development. For instance, Circeo, a Hungarian FinTech, decided to adopt IBM’s public cloud to drive its own digital transformation and accelerate its global expansion. By utilizing Red Hat OpenShift on IBM’s public cloud, Circeo launched new and innovative digital loan offerings to reach more customers faster in a highly flexible and secure environment. [SV2] [KG3]

Software as a Service (SaaS)

Furthermore, financial institutions can benefit from Software as a Service or (SaaS) to quickly deploy end-to-end business solutions without needing in-house development. Businesses can access software over the internet, with cloud providers taking care of infrastructure and upkeep, eliminating any need for physical installation or maintenance. This technology provides cost efficiency and increased scalability and security so that companies can focus on their primary goals. SaaS applications can cover many needs, from the customer experience and relationship management to risk analytics, helping institutions gain value from their cloud computing investments faster. The IBM Cloud for Financial Services includes a growing, ecosystem of over 130 ISVs and SaaS providers who IBM is working with to validate their security and compliance posture, helping to accelerate financial institutions’ digital transformations with a focus on trust and security at the forefront.

Serverless Computing

Serverless computing is an attractive PaaS offering for businesses looking to reduce costs and increase scalability. This cloud-based service simplifies server management, capacity planning, and infrastructure-related tasks — letting developers focus on writing code rather than worrying about underlying servers or serverless architectures. By entrusting these matters to the cloud provider, companies can make more time available to drive key objectives forward.

Artificial Intelligence and Machine Learning in the Cloud

The cloud provides a cost-effective and easily scalable platform to deploy AI and ML models, making AI tools more accessible to various industries and applications, including financial services institutions.

I believe that adopting the right cloud computing strategy is essential for businesses to build unique AI and ML capabilities in the cloud. These capabilities allow financial institutions to unlock valuable insights from massive amounts of data, automate processes, enhance customer experience, reduce risk, and drive innovation.

Indeed, as shared in a few articles I wrote in the past on AI advancements, AI can enable financial institutions to analyze, automate and engage with customers in a much more personalized way than human interaction, including responsible Generative AI. For example, AI-powered chatbots and virtual assistants can provide personalized advice and customer support. At the same time, reducing the cloud computing costs of operations and ML algorithms can help profile, target, and engage customers more effectively with the suitable types of next-best actions and personalized messages while identifying potential fraud patterns and preventing financial losses.

A responsible cloud strategy ensures that sensitive data is protected, as security is critical when handling financial information. In this context, public, private, and hybrid cloud environments offer different levels of control and security. From talking with the IBM Cloud for Financial Services’ team, these tailored environments enable financial institutions to make informed decisions about where their data resides and how it is processed while at the same time taking advantage of the scalability and flexibility offered by the cloud. Indeed, the security of these environments also depends on the specific workload being run. In IBM’s “Cost of a Data Breach Report 2023” which explains the experiences of 550+ organizations hit by a data breach, only 28% of organizations used security AI extensively, reducing costs and speeding up containment. Innovative technologies such as IBM Security® QRadar® SIEM use AI to rapidly investigate and prioritize high-fidelity alerts based on credibility, relevance and severity of the risk.

When exploring essential digital cloud services, I have observed that early AI research shows that financial services institutions can benefit from AI-powered automation, such as process automation for risk assessments, loan or underwriting approvals, and onboarding or claims processing. Additionally, cloud platforms provide access to vast amounts of data and advanced analytics tools, and machine learning, which can be used to understand customer behavior better and stay ahead of the competition.

Financial institutions must follow best practices and strategies to adopt cloud technologies responsibly. This includes adhering to established industry standards for security, ensuring proper data management, and engaging with cloud service providers who prioritize responsibility and compliance. AI and ML capabilities in the cloud offer financial institutions a competitive edge while safeguarding sensitive data's security and compliance needs. By choosing the right cloud technologies and strategy and following best practices, financial services institutions can undoubtedly thrive in the age of digitization.

Business Continuity with Cloud Computing

Financial services institutions must maintain business continuity plans for the smooth functioning of operating systems and to protect against unforeseen challenges. Cloud computing provides a resilient platform with numerous advantages regarding the underlying infrastructure and overall resiliency core banking systems.

One significant benefit of leveraging the cloud is the ability to easily scale (or downscale) your infrastructure based on environmental conditions and the demands of your business. This flexibility allows businesses to respond quickly to changes in the market, ensuring that the organization is always prepared for any situation.

Disaster recovery is another critical aspect of business continuity that must be addressed effectively using the cloud infrastructure. By storing data redundantly across multiple data centers or geographical regions, companies can minimize the risk of data loss or system downtime during hardware failures or natural disasters.

In addition, cloud providers typically offer advanced monitoring and management tools that enable businesses of any size to proactively detect and resolve potential issues before they impact the performance of their systems. This proactive approach to maintaining the health and stability of your IT infrastructure is essential for ensuring business continuity.

Furthermore, cloud computing makes it possible to implement robust security measures, such as encryption and access control, to protect sensitive financial information and maintain regulatory compliance. By moving your business applications and data to a secure, compliant cloud environment, you can mitigate security risks and ensure that your organization meets all necessary industry regulations.

Finally, the ability to leverage unique AI and ML capabilities in the cloud opens new possibilities for automating and optimizing processes that are essential for business continuity. Innovative cloud-native applications and services enable us all to implement cutting-edge solutions that improve the efficiency and resilience of our operations.

By adopting a responsible cloud computing strategy, financial services institutions ensure that they are well-equipped to tackle the challenges of today’s dynamic marketplace and maintain business continuity despite the current uncertain and ever-evolving landscape.

IBM Cloud for Financial Services

IBM Cloud for Financial Services is specifically designed to cater to the needs of financial institutions, banks, insurers, FinTechs and InsurTechs, enabling them to confidently host their mission-critical applications in the cloud and transact quickly and efficiently.

These cloud solutions incorporate industry-leading security capabilities and empower financial organizations to maintain data control while running their workloads where they need them without expanding operations. Notably, IBM works with some of the world’s leading banks, including BNP Paribas and CaixaBank.

This approach not only enhances security but also simplifies risk management and helps demonstrate regulatory compliance postures. Financial services institutions must ensure that all aspects of their cloud-based technology infrastructure, whether on-premises or in the cloud, comply with regulatory, governance, and risk management requirements. In addition, to protect the growth of each financial institution’s transformation and ensure the complete capture of the advantages of the cloud, IBM emphasizes the benefits of a zero-trust approach.

Indeed, one of the primary regulatory concerns for financial institutions using cloud computing is the need to maintain a strong risk management strategy as they operate within an industry marked by stringent regulatory compliance, focusing on maintaining the privacy, integrity, and security of client data. They must assess and evaluate their cloud infrastructure to ensure it adheres to existing and evolving regulations. This means actively collaborating with a cloud provider to ensure compliance-driven data storage, transmission, and processing practices provided by IBM Cloud for Financial Services, public cloud, private cloud, and hybrid cloud options, giving businesses the flexibility to choose the most suitable components for their specific needs. Further, regarding crucial cloud services, IBM Cloud for Financial Services offers a comprehensive ecosystem of in-house and ecosystem capabilities, including integration with AI and ML capabilities, enabling financial institutions to extract valuable insights from their data and drive innovation.

This proactive approach helps financial institutions mitigate the cost and complexity of compliance in a constantly changing cybersecurity landscape. For instance, IBM’s acquisition of Promontory, a regulatory compliance and consulting firm, has strengthened IBM’s ability to ensure business continuity, resilience in cloud computing, and responsible cloud adoption.

Responsible Cloud Adoption Strategies and Best Practices

Adopting cloud computing in a responsible manner is critical for ensuring the security, compliance, and data protection of financial services institutions. I would like to share some strategies and best practices for responsible cloud adoption that cater to the needs of CIOs, CTOs, CISOs, as well as finance, compliance, and risk officers.

First and foremost, understanding the shared responsibility model is essential. In cloud computing, the responsibility for security and compliance is shared among stakeholders, including the cloud service provider and the financial institution. I recommend clearly defining roles and responsibilities to ensure a robust security posture and compliance with control requirements.

Another essential aspect of responsible cloud adoption is the process of selecting the appropriate cloud environment — public, private, or hybrid. I encourage financial institutions to assess the advantages and disadvantages of each environment and choose the one that best aligns with their risk management strategy, compliance requirements, and sustainable strategic goals.

As financial services institutions embrace digitization, evaluating and adopting critical cloud services that drive innovation is vital. Whether IaaS, PaaS, or SaaS, each option has its respective strengths and weaknesses when deploying advanced technologies or data-heavy AI and ML modelling capabilities. The capabilities are there to enhance decision-making, redesign business models and develop competitive products and services.

Compliance with regulatory constraints and ensuring data protection should always be top priorities. To manage these responsibilities, I propose continuously monitoring and auditing cloud environments and implementing tools that provide visibility input data back into the security and compliance posture.

I highly recommend IBM Cloud for Financial Services® as it is designed to help financial institutions reduce the complexity of managing ISV and SaaS workloads while helping institutions demonstrate regulatory compliance more efficiently. The Framework operates with a shared-responsibility model across all parties that allows financial institutions to move to the cloud, helping address regulatory barriers that can impede modernization.

In conclusion, adopting a responsible cloud strategy enables financial institutions to reap the benefits of cloud computing while maintaining a strong focus on security, compliance, and data protection. By following the best practices and strategies outlined here, institutions, alongside their ecosystem partners, can ensure a smooth transition to the cloud and foster growth in the age of digitization.