Financial institutions should work to understand and smartly manage their dependence on major cloud and artificial intelligence providers because that reliance comes with risks and advantages, according to a recent Microsoft report.
The report found financial institutions increasingly use third-party cloud and AI platforms such as Microsoft’s Azure AI Foundry, which breeds concentration risk that requires proper exit planning.
Exit plans enable financial institutions to remove contracted IT services and securely transfer related data in-house or to alternate providers. Extricating an organization from these partnerships is so complex that strict vendor diversification enforcement is becoming less popular.
“Concentration risk is addressed by reducing the likelihood and impact of failures through resilient design, distributed deployments and robust security,” reads Microsoft’s report. “This is achieved primarily by developing durable business continuity plans and complementing these with exit strategies where possible.”
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The Keys to Effective Exit Planning
Effective exit plans evolve with financial institutions’ cloud journeys. There’s nothing inherently wrong with choosing robust, scalable platforms from a small handful of vendors, so long as they address critical resiliency, security and compliance needs, according to Microsoft’s report.
The best exit plans document and prepare for moves to viable alternative platforms and make the case for risk acceptance where none exist.
“Fortunately, given the complexity of today’s hybrid and multicloud environments, regulators do not expect ‘perfect’ exit plans,” writes Tom Deprins, director of cybersecurity and compliance for Europe at Microsoft, in a blog. “Instead, they encourage risk-based, practical and tested practices that dovetail with broader efforts.”
Tech giants such as Amazon Web Services are also underscoring their ability to allow financial customers to increasingly mix and match IT services across providers through multicloud tools, open standards and waived data transfer fees. Advances in AI are improving this flexibility.
“AI is creating demand for new features that drive competition and reducing the complexity of managing IT solutions across different environments,” notes a recent AWS blog. “Customers can now point an AI tool at code written for one cloud provider's services and have it rewrite that code for another's — quickly and efficiently.”
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Microsoft’s Six-Step Resilience Framework
Microsoft offers a six-step resilience framework that serves as a structured approach to exit planning:
Update cloud risk governance. Organizations must be ready to assess the effectiveness of their cloud and AI adoption.
Identify concentration. Determine which third-party and indirect dependencies are critical.
Assess alternatives. Evaluate possible exit strategies that reduce risks caused by concentrating on particular vendors.
Design for resilience. Incorporate quick recovery processes for hardware failures and service outages to maintain critical operations.
Test the business continuity plan. Prepare for more substantial, longer-term failures and outages with gap testing and vetting of recovery procedures.
Prepare exit plans. Make the call on whether to cut ties with a vendor partially or fully, and methodically lay out a timeline, resources and contingencies for a seamless transition.
“This integrated approach ensures that exit plans remain both practical and sustainable, and do not exist in isolation,” Deprins writes. “Ultimately, exit planning is part of a larger system of controls and safeguards, evolving alongside the business’s cloud and AI innovation cycles.”
