With risk management and compliance becoming key areas for custodians and other financial entities to focus on, cloud technology has gained more presence in the wider financial markets.
As the landscape for the role of custodians changes and participants look to minimize operational and infrastructural risk issues, Global Custodians Lianna Brinded speaks to BT Global Services President Andy Nicholson on how cloud technology could mitigate this.
Q: There has been much discussion about the rapid expansion of cloud technology amongst financial services firms. How are custodians making use of this technology in their global strategies?
A: Cloud technology has the potential to dramatically increase the efficiency of managing and analyzing client data. The role of custodians has changed rapidly in recent years, moving away from settlement and accounting and more toward areas such as risk management and compliance. Cloud technology offers the ability to access and manage data anywhere there is an Internet connection – and in real time. It also means that custodians and their clients can spend less time managing their data and more time focusing resources on their core competencies.
Q: How are custodians benefitting from the use of cloud technology?
A: Cloud services offer a usage-based pricing model, which avoids the budgeting and project processes associated with capital investments for new systems. Maintenance is also built into usage-based pricing so that cloud services providers manage the costs and additional resources associated with server, software, network and other technology upgrades. This can have a very positive effect on budgets as well as profitability in terms of capital costs and depreciation. For example, an independent study has shown that community clouds can save firms more than 50% in total costs of ownership for a connectivity platform.
Q: What are the challenges in adopting cloud technology?
A: Security concerns over hosting data on the cloud are still a primary concern for clients. Data has to be protected when its at rest and encrypted when its moving. Reliability is another issue that needs to be addressed. Industry experts agree that the key to using cloud hosting safely is finding a responsible provider that provides backup programs so your online data can also be stored in-house.
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