Analysis of the FFIEC’s Statement on Cloud Computing

On July 10th, 2012, the FFIEC published a “Statement on Cloud Computing” in a new section of the ffiec.gov resource library for guidelines related to information technology governance.  This statement served to declare that cloud computing providers are simply another form of outsourcing, and thus banks are required to apply due diligence to cloud providers just like any other vendor.  We would like to add what we read between the lines: even if the cloud service is free.

The FFIEC Take on Cloud Computing

Beyond this clarification, we believe that there really is nothing new in the statement; as long as  your existing vendor management process is strong, it should already be properly addressing cloud computing.  In other words, if  you are appropriately aligned with the framework of the Outsourcing Technology Services Booklet (“Outsourcing Booklet”), you are already properly addressing the cloud computing service model.

However, we also believe that the FFIEC would not have published this statement had they not been finding, on a national scale, what we’re seeing in some of the banks we’re auditing:  management team members are bypassing vendor management controls.  We’ve already published links to stories about data losses and horror stories related to cloud computing.

Beyond requiring that your management team members better understand those controls, the statement also highlights a few critical issues that, though not unique to cloud computing, are inherent in the cloud computing model:

1)      Data Classification:   The sensitivity of the data “uploaded to the cloud” will determine the level of scrutiny and required controls PRIOR to engaging a cloud provider.  If data is classified as confidential or critical, the same controls we’d require of our critical vendors would be required of a cloud provider.  For those of us who have justified NOT performing a data classification analysis, where we inventory all data and categorize it as Public, Confidential, or Critical, cloud computing might be the straw that breaks that camel’s back.

2)      Data Segregation:  Because cloud computing leverages the community use of shared resources, an important part of your due diligence checklist for cloud computers should include ensuring that controls are in place to ensure integrity and confidentiality of data.   We want to be sure that our data is not being stored in a manner where one customer can access another customer’s data (either accidentally or maliciously.)

3)      Business Continuity:  The statement uses the term “recoverability,” but the same business continuity questions you’d ask of any vendor will need to be asked of your cloud providers.  Though the statement does not specifically express this, we also believe you should be sure you know how data can be recovered in the event you fire the cloud provider.   The best way to establish this is to establish that you own the data.  Of course, if the generic agreement . . . . that accept button you or your manager clicked . . . . doesn’t establish this then the data you already uploaded is no longer yours.

4)      Breach Notification:  Check the standard agreement that accompanies cloud sites and you’ll often find that this important legal and reputational risk mitigator is missing.  You can mitigate this by watching the cloud provider in the press but would you accept this with other vendors who you pay to host your data?

5)      Destruction of NPI:  If you end your relationship with the cloud provider, how do you know that your data has been properly purged from their systems, and won’t be discovered a few years down the road on some retired server that was donated to your provider’s favorite charity?

If you, like most banks, have been taking vendor management seriously, you should not have much to worry about with cloud computing, other than what you’re probably already worried about:  getting your management team to remember the need for vendor due diligence.