The Cloud Conundrum: Are Financial Institutions Heading for a Catastrophic Disruption Event?

This study delves into the escalating risk of a major disruption event involving Cloud Service Providers (CSPs) within the global financial system, amidst shifting supplier dynamics and mounting economic challenges. It focuses on the increasing dependence of financial institutions on three CSPs for critical business services, highlighting the emergent issue of “cloud concentration risks.” The paper explores various factors influencing technological decisions in financial institutions, including events and the regulatory environment. The advantages of cloud computing, and the potential risks associated with CSPs transitioning their business models from growth-centric to value-oriented strategies are also discussed. Furthermore, CSPs are contending with rising operational costs and diminishing profit margins, compelling them to adopt cost-saving measures such as prolonging the lifecycles of hardware components. This analysis also considers the implications of potential increases in cloud computing costs and the financial burden of migrating services, underscoring significant challenges faced by financial institutions in this evolving landscape.