The latest resilience news from around the world

ESMA, the European Securities and Markets Authority, has issued a working paper on ‘Financial stability risks from cloud outsourcing’. The paper discusses the dependencies that now exist, where a single outage at a cloud service provider (CSP) could have widespread impacts across the financial sector.

Abstract (verbatim)

Financial institutions increasingly rely on Cloud Service Providers (CSPs).

Cloud services can increase resilience of individual firms. However, given the high concentration of CSPs, a single CSP outage could generate simultaneous firm-level outages, posing systemic risk.

Our model examines this possibility. We calibrate the model with operational risk data to simulate outages among CCP clearing members and show that CSPs need to be significantly more resilient than firms to improve the safety of the financial system. In financial settings where only longer (multi-period) outages impose systemic costs, CSPs can best address systemic risk by strongly reducing incident resolution time, rather than incident frequency.

Finally, we show that the use of an idealized back-up CSP successfully mitigates systemic risk from CSPs. Back-up requirements may need to be imposed by policymakers however, as the systemic risk is an externality to individual firms.

Read the paper (PDF).

Want news and features emailed to you?

Signup to our free newsletters and never miss a story.

A website you can trust

The entire Continuity Central website is scanned daily by Sucuri to ensure that no malware exists within the site. This means that you can browse with complete confidence.

Business continuity?

Business continuity can be defined as 'the processes, procedures, decisions and activities to ensure that an organization can continue to function through an operational interruption'. Read more about the basics of business continuity here.

Get the latest news and information sent to you by email

Continuity Central provides a number of free newsletters which are distributed by email. To subscribe click here.