The perfect storm – cloud risk accumulation

Cloud services have become widespread, for businesses and consumers alike. The increase in data volumes, and the mobility of data access have been driving the adoption of cloud computing as well as lower costs. The cloud allows different users to access and share data. Clouds-of-clouds – integrated distributed cloud services – or super clouds, promise cloud services regardless of where you are and where the data you want to process is hosted.

In theory, interconnected services like these can be set up as closed systems. Cloud service providers like Google, Microsoft or Amazon Web Services operate data centres through the internet, thus encompassing vast networks of data flow and management.

But as the cloud of cloud (super cloud) accumulates data-sets and services on an ever-increasing scale, it also generates a variety of risks that may accumulate to a “perfect storm.” Should an event bring down or severely impair a super cloud, whether through a technical failure, a cyberattack or a
power blackout – possibly caused by a natural disaster –, and last a couple of days, the financial loss could be immense.

If a huge data storage provider like Amazon Web Services is disabled for 24 hours, it’s going to cause business interruption for countless sub-providers and their clients. If webpages and business applications are not running and business data not accessible, business processes will discontinue, and the accumulated loss could be considerable. Since operations and supply chains will be inevitably affected, the longer the interruption persists, the widerranging the effects will be. And the indirect consequences for a third party can also be generated by a region geographically remote. The accumulative property of the super cloud consequently makes it a preferred target for hackers and cyber war strikes.

Potential impact:

  • High severity of a single event due to the inherent accumulation potential
  • Business Interruption (BI) and Contingent Business Interruption (CBI)
  • Liability for data loss and privacy issues
  • Loss scenario depends on location, concentration and redundancies of clouds-of-clouds service
  • Regulatory complexities and uncertainties abound, affecting operations of global players

This text is an excerpt from the "Swiss Re SONAR, New emerging risk insights", June 2017.

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