Why the Financial Services Industry needs to rethink its IT by embracing the cloud

2018 has witnessed PR failures from some of the major global financial institutions in the UK after the breaching of certain regulatory compliance due to outdated technical architecture and processes which fail to manage risk within these businesses. This is not only a huge reputation risk but also highlights the weak areas and slow pace of innovation at these big conglomerates. At the same time, these financial institutions are taking a hit on their customer satisfaction and loyalty due to operational glitches/service non-availability. In an industry where the competition and cost of customer acquisition is fairly steep, this is an anti-pattern which should be avoided. Regulators and banking associations have significantly improved their messaging. Instead of giving hints and tips, they are coming out in the open and offering solid guidelines & directives for the Financial Services Industry to think about the changing technology landscape, business dynamics (as new customer products & offerings emerge), and increased regulatory overhead which is mandatory to gauge the health of the FSI vertical.

How to improve operation resilience for financial market infrastructure

Recently, Prudential Regulatory Authority (PRA) and Bank Of England (BoE) published an article and also kicked off a joint discussion paper (DP) to improve operation resilience for financial market infrastructure in the light of recent incidents. Yet another great example of how regulators are trying to push the boundaries and asking these firms to think ahead and embrace new technology to solve business problem.

They laid down a few key concepts:

• Business continuity planning (BCP) to manage operational resilience

BCP is key to operational resilience, a lot needs to be done (from procuring to testing to maintaining) to have a truly good BC plan. Buying upfront capacity and taking a hit on CapEx is an option but clearly losing out on the opportunity costs (what else can you do if not this?) and also not viable long-term strategy. Public cloud offers amazing business agility and with automation that can manage back-ups, auto-provisioning and disaster recovery across the globe they can significantly improve operational resilience at much lower costs and let you focus on what you're best at.

• Board approved tolerances and level of disruption

This again highlights the holes in the existing IT governance and how an exacerbated IT demands good governance. Cloud not only offers the right tools to give management level visibility and KPI tracking, it also enables smarter governance by automation & effective risk management through infrastructure as code and compliance as code. It’s important to re-organise, up-skill, and operate with a new governance model to set tolerances and manage them better.

• Planning for failures

This is a great point. Financial institutions often plan for service operations and not really for failures. This requires significant scaling capabilities along with full infrastructure for IT teams to perform a series of non-functional tests before they can ship their products to the market. Cloud is perfectly suited to offer the on-demand scalability along with tools that boost staff productivity and improve code quality through DevOps process improvement.

Public cloud providers can solve operational, technology and security issues

We think it’s a great start and a perfect way to start discussions within the FSI and to help them re-focus on operational challenges. More importantly, it will help with what they want to do today, tomorrow and next year to make them profitable. It’s clear that financial institutions are great at creating financial products and public cloud providers are great at solving operational, technology, security issues as they have the skills and the resources to do so. It’s important that financial institutions start off-loading these non-core functions and look for partnerships or create joint ventures with hyper-scale cloud providers and enablers like Nordcloud to be relevant in the future.

Are you set up for digital resilience in the cloud?

Our aim is to help businesses finally unlock the full potential of cloud in this sector. As part of this, we’ve developed a cloud-based strategy to achieve business continuity - called the Digital Vault. helping you use cloud to safeguard critical data and keep essential services running during disturbances. For financial services, basic continuity planning has always been part of keeping up with regulations. But two factors are driving business continuity up the agenda for FSI right now:

• The current geopolitical instability in Europe
• New regulations like DORA and NIS that require businesses to leverage digital technologies like the cloud to keep running in the event of a disruption or emergency

Get started by reading our handy guide. It explains things a little more, and breaks down whether or not you're really resilient to potential risks. Read it here.