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Cloud Service Provider Risks and Mitigation Tips

4 min read
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Cloud service providers, like Google Cloud, Dropbox, and Amazon Web Services, are widely used across many organizations because of their abilities to manage and store large amounts of data with ease. These third parties are also popular for being cost effective because they operate through a global network and eliminate the need for physical servers.

Despite the prevalent use of cloud service providers, it’s important to remember that they can expose your organization and customers to third-party risk that must be mitigated and managed. 

The Basic Risks of Cloud Service Providers    

All third parties carry some amount of risk, and cloud service providers are no exception. Many of these risks will essentially fall under the following three categories – security, availability, and compliance. In other words, you need to ensure your cloud service provider is keeping your data secure and accessible and is handling your data in a way that’s compliant with any applicable laws and regulatory expectations. 

Here’s a closer look at each risk category you should evaluate with your current or prospective cloud service providers:  

  • SecurityThird-party security incidents like data breaches and cyberattacks can lead to significant consequences for your organization. These consequences may include operational failures, reputational damage, and financial loss that comes from legal fees, regulatory fines, and lost revenue. Security should always be a top priority when assessing and monitoring your cloud service providers. This will ensure your organization’s data is well protected from external threats and accidental exposure.
  • Availability – Cloud service providers can also present some challenges with data availability, which can lead to significant operational disruptions and delays. Consider the potential issues that might occur if your cloud service provider suffered an outage or some other technical issue that prevented you from gaining access to your data. Even a common issue like poor internet access can create difficulties in data availability. 
  • Compliance – Data privacy laws and other regulatory guidelines set strict standards on how organizations must store, transmit, and protect their customers’ information. It’s important to remember that compliance with these laws and regulations must extend to your cloud service providers because protecting your customers’ data is still your responsibility. A cloud service provider that’s noncompliant with laws and regulations can put you at risk of fines and other negative consequences. 

Ways to Mitigate Basic Risks of Cloud Service Providers  

Now that you’ve learned what the basic risks of cloud service providers are, let’s cover some recommendations to help mitigate each of these risks.  

  • To mitigate security risks, ensure cloud service providers have policies and procedures in place that address areas such as security testing, data security, incident detection and response, and employee and vendor management. Your organization should also follow the principle of least privilege by limiting the amount of data cloud service providers have access to. Verify that the cloud service provider is following best practices like multi-factor authentication and annual privacy and security training. 
  • To mitigate availability risks, it's important to continuously monitor and perform periodic reviews on the cloud service provider's performance. Consider using key performance indicators (KPIs) to track the cloud service provider’s uptime and outages, so you can address any performance issues before they become larger problems. Service level agreements (SLAs) can also be a helpful tool to mitigate availability risks. These can help ensure your organization is compensated or free to terminate the contract if the cloud service provider fails to meet certain standards.   
  • To mitigate compliance risks, review the cloud service provider’s most recent compliance and security audits and the provider’s compliance policies. Third-party or external audits can give you an unbiased evaluation of the cloud service provider’s current practices and control environment. Internal policies should address applicable areas like data protection, privacy, and access control. 

cloud service provider risks mitigation tips

3 Additional Tips to Mitigate Cloud Service Provider Risks  

Depending on your organization’s strategic goals and risk appetite, a cloud service provider might still be a good option that can meet your needs. If so, your organization should understand how to mitigate cloud service provider risks with some of the following practices:   

  1. Ask the right questions – When assessing a cloud service provider, it may help to use an industry-specific questionnaire to gather relevant information. The Cloud Security Alliance’s Consensus Assessments Initiative Questionnaire (CAIQ ) is a good resource to assess potential cloud service providers. This questionnaire will help you determine whether the cloud provider has sufficient controls in place to safeguard your data.
  2. Examine the security measures – Ask for documentation about the provider’s encryption practices, security standards, data migration processes, data breach notification procedures, audit findings, and more. Also make sure to evaluate business continuity and disaster recovery plans to understand how the cloud service provider will respond to and recover from a business-disrupting event like a data breach or service outage. If a SOC 2 Type II report is available, that’s another great resource to assess a cloud service provider’s control environment.

    Pro Tip:  Many cloud service providers are large vendors. It’s often difficult to get larger cloud service providers to provide answers to questionnaires. However, it’s still important to gather due diligence. Check the cloud service provider’s website for standard due diligence information, policies, certifications, and reports. The cloud service provider may also have a complete CAIQ that will answer many of your questions. 
  3. Consider an exit strategy – This is an essential step that should be taken before you sign the contract. An exit strategy determines how your organization will safely disengage with the cloud service provider. It’s important to consider details such as how and when the cloud service provider will securely transfer or destroy your organization’s data. 

Cloud service providers are likely to continue growing and evolving, which can offer many new opportunities for organizations of all sizes. If your organization partners with a cloud service provider, don’t forget to manage the risks!

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