Cloud security risks in third-party dependencies

Financial institutions are increasingly adopting cloud computing to improve scalability, flexibility, and cost-efficiency. However, this cloud adoption introduces new security challenges, particularly concerning third-party dependencies. Financial institutions often rely on various third-party cloud service providers (CSPs) and vendors, which can create complex dependencies and increase the attack surface. This article examines the specific cloud security risks associated with third-party dependencies and provides strategies for financial institutions to mitigate these risks.

Understanding cloud-related third-party dependencies

Cloud environments involve a complex ecosystem of third-party dependencies, including:

• Infrastructure as a Service (IaaS) providers: These providers offer fundamental computing resources, such as servers, storage, and networking. Financial institutions depend on IaaS providers for their cloud infrastructure.
• Platform as a Service (PaaS) providers: These providers offer a platform for developing, running, and managing applications. Financial institutions may use PaaS providers for application development and deployment.
• Software as a Service (SaaS) providers: These providers offer software applications over the internet. Financial institutions utilize SaaS applications for various business functions, such as customer relationship management (CRM) and human resources management (HRM).
• Cloud security vendors: Financial institutions often rely on third-party security vendors for cloud security tools and services, such as intrusion detection, vulnerability scanning, and data encryption.

Cloud security risks associated with third-party dependencies

Relying on third-party CSPs and vendors introduces several cloud security risks for financial institutions:

• Data breaches: Third-party providers may experience data breaches, which can expose sensitive financial data.
• Service disruptions: Disruptions to third-party services can impact financial institutions’ operations and availability.
• Compliance violations: Third-party providers may not comply with relevant regulations, leading to compliance violations for financial institutions.
• Lack of visibility and control: Financial institutions may have limited visibility and control over the security practices of third-party providers.
• Supply chain attacks: Attackers may target third-party providers to gain access to financial institutions’ systems and data.

Mitigating cloud security risks in third-party dependencies

Financial institutions can take several steps to mitigate cloud security risks associated with third-party dependencies:

• Vendor risk management: Implement a robust vendor risk management program to assess and manage the security risks associated with third-party providers.
• Due diligence: Conduct thorough due diligence before engaging with any third-party provider, including assessing their security certifications, compliance status, and incident response capabilities.
• Contractual agreements: Establish clear contractual agreements with third-party providers that outline security requirements, data protection obligations, and incident reporting procedures.
• Security assessments and audits: Conduct regular security assessments and audits of third-party providers to ensure they meet the institution’s security requirements.
• Data encryption: Encrypt sensitive data both in transit and at rest to protect it from unauthorized access, even if a third-party provider is compromised.
• Access controls: Implement strict access controls to limit third-party provider access to only the necessary resources and data.
• Monitoring and logging: Implement robust monitoring and logging mechanisms to track third-party provider activity and detect any suspicious behavior.
• Incident response plan: Develop a comprehensive incident response plan that addresses potential security incidents involving third-party providers.

The shared responsibility model

It’s crucial for financial institutions to understand the shared responsibility model in cloud computing. Cloud providers are responsible for the security of the cloud (i.e., the underlying infrastructure), while financial institutions are responsible for security in the cloud (i.e., their data and applications). This shared responsibility necessitates clear communication and collaboration between financial institutions and their third-party providers.

Cloud computing offers significant benefits for financial institutions, but it also introduces unique security challenges related to third-party dependencies. By implementing robust vendor risk management practices, conducting thorough due diligence, and adhering to the shared responsibility model, financial institutions can mitigate these risks and securely leverage the power of the cloud.