Businesses have always had to manage risk – everything from operational, financial, or strategic risks; to other risks that are reputational, regulatory, or cybersecurity-related.
So how does enterprise risk management (ERM) work today, when so many businesses are moving so much of their operations into the cloud? How can CISOs and other senior executives take traditional ERM principles and apply them to the cloud-based technology that underpins so much of the modern enterprise?
After all, the importance of ERM is broad and far-reaching. A comprehensive ERM framework consolidates and enhances risk information so you can identify the key risks that can affect your organization, quantify and better manage them, and implement appropriate controls to eliminate or reduce them.
ERM also guides business decision-making, so the risks taken are calculated and deliberate, ensuring alignment with the company’s objectives, vision, mission, and goals.
How does a management team do all that in a cloud-based IT environment?
What Is Risk Management in Cloud Computing?
Cloud computing is a technology strategy for everything from data storage to mission-critical business processes; and has become an essential element of business operations. Cloud-based services are often cheap, easy to roll out, and easy to use from any location.
At the same time, cloud solutions also increase the number of potential security vulnerabilities an organization has. They broaden the scope of risk assessments, monitoring, and audits. The cloud brings more third-party risks, so deft management of those risks becomes essential. That means organizations should implement risk management frameworks, as well as privacy-by-design and security-by-design principles, to protect your data.
Unfortunately, effective risk monitoring is often absent in small and medium-sized organizations. That leads to increased risk in cloud security, data security, and privacy.
Types of Enterprise Risks in Cloud Computing
Unauthorized Access to Business Data
Cloud computing services manage data from thousands of companies. Each company using a cloud service, however, increases the value of that service as a potential target for cyber attackers – and the risk is concentrated at a single point of failure (the cloud service provider). As a result, a cyberattack at a cloud provider could affect all of its customers.
No business is safe in this scenario. Attackers may target small businesses because those companies typically have weaker controls and may be easier to breach. Alternatively, some attackers prefer to target larger companies because of the lure of hefty payouts.
Cloud Vendor Security Risks
Using cloud providers exposes you to additional third-party risks. Doing business with any vendor that experiences business challenges such as bankruptcy, lawsuits, regulatory investigations, or other threats could inadvertently harm your organization’s reputation and goodwill.
Many small businesses know little about the technology behind the cloud services they use. As a result, your reputation no longer depends only on the integrity of your company: it now also relies on the integrity of the cloud provider’s company. And that’s a risk of cloud computing.
Due to the ease of access to IaaS (infrastructure as a service), there has been a proliferation of innovative SaaS (software as a service) startups providing cloud services. Some offer unique features that traditional providers have left unmet.
Some of these providers, however, may lack the expertise required to meet stringent control requirements. Their products may also be unsustainable for large organizations that need to exchange increasing amounts of data.
Legal or compliance risks arise from non-compliance with various industry regulations or regulatory requirements, such as the Health Insurance Portability and Accountability Act (HIPAA), Sarbanes-Oxley Act (SOX), Gramm-Leach-Bliley Act (GLBA), or the European Union’s General Data Protection Regulation (GDPR).
When a data breach in a cloud service provider exposes personal data, your company may be held accountable if it does not have proper protections in place. In other words, a cloud service provider suffers a breach of your data, and you will still suffer the consequences. Proper legal contracts to place as much of that responsibility back upon the cloud provider are vital.
When an organization manages its own IT infrastructure such as enterprise tools, documents, computing resources, and processes, it has direct control over these elements (along with responsibility for their care). When outsourcing to a vendor cloud environment, the control resides with the cloud provider – not you.
If your Internet access is lost, you will be unable to access your provider’s cloud service. You’ll have to wait until the Internet is back up and running if you need to use the cloud service to process customer payments or access sensitive data. You don’t have this problem when operating on a local server.
Another risk associated with the cloud is that the service provider may fail. The service can become unresponsive due to various factors, including adverse weather, distributed denial of service (DDoS) assaults, or some other system breakdown.
Downtime of cloud environments, platforms, or infrastructure can significantly affect companies that rely primarily on cloud computing technologies for their day-to-day operations and corporations that provide user services.
Best Practices for Cloud Computing Risk Management
An effective ERM process uses a mix of corporate governance, risk management processes, and internal controls. It coordinates managers, employees, third-party suppliers, and other stakeholders to embrace risk-taking as an avenue for growth and opportunity. Here are some best practices for cloud computing risk management.
Carefully select your cloud service provider (CSP). Conduct supplier risk evaluations for contract clarity, ethics, legal liability, viability, security, compliance, availability, and business resilience, among other things.
Determine whether or not the CSP itself has service providers it can rely on to deliver its solutions and adjust the scope accordingly.
Establish adequate controls based on the risk treatment. After measuring the risks and determining the risk appetite, the resulting risk treatment solutions will drive the program in a reasonable, pragmatic and prioritized manner.
An essential aspect of risk management is to build robust data classification and lifecycle management methods. It’s also a good idea to incorporate processes in your service-level agreements (SLAs) for safeguarding, and even erasing, data hosted in the public cloud.
Deploy technical safeguards. Technical safeguards, such as a cloud access security broker (CASB), can be cloud or on-premises security policy enforcement points between cloud service users and providers. It serves as an enforcement point for enterprise security policies when users access cloud-based resources.
Vendor management. Third-party suppliers’ presence in cloud business models has generated security concerns. Many cloud services are subject to third-party security audits, such as those specified by the International Organization for Standardization (ISO).
Consider building a public cloud strategy that includes security criteria for suitable SaaS usage to avoid security risks.
Implement a comprehensive ERM framework. The Committee of Sponsoring Organizations (COSO) offers a comprehensive ERM framework to help you succeed, as does the International Organization for Standardization (ISO).
Governance, risk management, and compliance (GRC) software can help you track and automate many of your risk management tasks to ensure compliance with various frameworks.
ZenGRC Is Your Partner for Risk Mitigation
ZenGRC is a governance, risk, and compliance (GRC) platform that helps you assess and manage your organization’s risks. Its SaaS solution offers seed content for industry standards, regulations, and frameworks, including COSO’s ERM framework, ISO, HIPAA, GDPR, and more.
By combining all records, reports, policies, procedures, workflows, and checklists in one location, ZenGRC creates a single source of truth. Incorporate vendor management into your enterprise risk management processes more quickly with vendor questionnaire storage and analysis.
Its advanced reporting capabilities provide easy-to-understand reports and dashboards that help you visualize your risk profile. These features enable better decision-making and improved collaboration.
Schedule a demo to learn how ZenGRC can help your company establish an effective enterprise risk management program.