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Bank of England cloud warning: Legal services need appropriate risk management

Hybrid IT solutions will become more popular as a result of a series of high-profile warnings around cloud technology, according to leading technology resource supplier Xperience, which says that legal services businesses need to ensure they are discharging their regulatory obligations in light of the ‘opacity’ of cloud providers.

The prediction follows the Bank of England’s (BoE) warning in mid-July that cloud computing providers to the financial sector can be “secretive” and that regulators need to avoid banks’ reliance on a handful of outside companies, particularly Amazon, Microsoft and Google. “That concentrated power on terms can manifest itself in the form of secrecy, opacity, not providing customers with the sort of information they need to monitor the risk in the service,” BoE governor Andrew Bailey told a news conference. “We have seen some of that going on.”

Iain O’Kane, managing director of Xperience, said: “In the pandemic we saw many organisations seek out the logistical advantages in cloud services. But the Bank of England has made plain the risks apparent when storing data with companies whose lack of transparency may be in conflict with their regulatory requirements. The risk management issue is further compounded by the alleged politically motivated attack on high profile international technology companies”.

Xperience predicts a significant move towards hybrid IT where businesses use a mix of on-premises, private cloud and third-party, and public cloud services and allows data and applications to be shared between them. This typically involves a connection from an on-premises data centre to a private or public cloud.

O’Kane said; “Every UK business, including legal services, should have appropriate risk management in place, especially if the business is regulated. It is crucial that in the selection process that your chosen cloud partner is transparent in how they manage your data. For those organisations that want the flexibility of on-premise and cloud – a hybrid cloud service not only reduces risk through improved security and compliance it also offers greater flexibility and scalability in these uncertain times – it also provides simplified costs, so a business only pays for what it uses.”

The Bank of England said it is working with the U.K. Treasury and the Financial Conduct Authority on how to tackle the risks.