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The Cloud Security Challenge

As the use of cloud services continues to grow, it’s generally well accepted that in most cases reputable service providers are able to use their economies of scale to offer levels of security in the cloud that match or exceed what enterprises can establish for themselves.


What is less clear is whether there are currently appropriate mechanisms available to enable an effective determination of whether the security controls a cloud service provider has in place are appropriately adapted to the needs of their various customers (or potential customers). There’s also a lack of clarity as to whether providers or customers should ultimately bear principal responsibility for answering this question.

These ambiguities are particularly highlighted in the case of highly abstracted public cloud services where the organisations using them have very little ability to interact with and configure the underlying platform and processes used to provide the service. In particular, the ‘shared environment’ these types of services offer creates a complex and dynamic risk profile: the risk to any one customer of using the service — and the risk profile of the cloud service as a whole — is inevitably linked with all the other customers using the service.

This article explores these issues in more detail, including discussing why representations around the security of cloud services is likely to become an increasingly important issue.

Why it matters: regulators are starting to care about security

It is important to appreciate the regulatory context in which the growth in the use of cloud services is taking place. Specifically, there is evidence of an increasing interest by regulators and policymakers in the development of rules around cyber security related matters2. This includes indications of increased scrutiny regarding representations about cyber security that are made by service providers.

Two recent cases in the USA highlight this. In one instance, the Consumer Financial Protection Bureau (a federal regulator, similar to the Australian Securities and Investments Commission) fined Dwolla — an online payment processing company — one hundred thousand US dollars after it found Dwolla had made misleading statements that it secured information it obtained from its customers in accordance with industry standards3.

Similarly, the US Federal Trade Commission recently commenced legal proceedings against Wyndham Worldwide, a hospitality company that managed and franchised a group of hotels. After a series of security breaches, hackers were able to obtain payment card information belonging to over six hundred thousand of Wyndham’s consumers, leading to over ten million dollars in losses as a result of fraudulent transactions.

The FTC alleged that Wyndham had contravened the US Federal Trade Commission Act by engaging in ‘unfair and deceptive acts or practices affecting commerce’4. The grounds for this allegation were numerous, but included that Wyndham had represented on its website that it secured sensitive personal information belonging to customers using industry standard practices, when it was found through later investigations that key information (such as payment card data) was stored in plain text form.

The case against Wyndham was ultimately settled out of court, but demonstrates an increasing interest by regulators in representations made in relation to cyber security by service providers. It is not inconceivable that similar action could be taken in Australia if corresponding circumstances arose, given the Australian Competition and Consumer Commission’s powers to prosecute misleading and deceptive conduct under the Australian Consumer Law5.

While the above cases do not apply to cloud service providers per se, they serve as examples of the increasing regulatory interest that is likely to be given to issues that relate to cyber security. Indeed, while regulatory regimes around cyber security issues are still in relatively early stages of development, it is feasible to expect that cloud providers in particular will come under increased scrutiny due to their central role in supporting the technology and business functions of a high number of customers from multiple jurisdictions.

There is also a strong likelihood that this scrutiny will extend to the decisions made by customers of cloud providers. In Australia, for example, if a company wishes to store personal information about its customers on a cloud service provider’s servers overseas, they would (subject to certain exceptions) need to take reasonable steps to ensure the cloud provider did not breach the Australian Privacy Principles in the Privacy Act 1988 in handling the information. Among other things, this would include ensuring that the cloud provider took reasonable steps to secure the information6. Similarly, data controllers (and data processors) in the EU will be required under the new Data Protection Regulation to ensure that appropriate technical and organisational measures are in place to ensure the security of personal data7.

The question then arises as to how cloud service providers and their customers are supposed to make sure they take appropriate steps to ensure they meet their responsibilities in assuring the security of cloud services in the context of a nascent and still developing regulatory environment. At first glance, the solution to the problem appears simple — benchmarking a cloud service against industry security standards. As discussed below, however, there are significant challenges with this approach.

The problem with bench-marking cloud security against industry standards

Many cloud service providers point to certification against standards such as ISO 27001:2013, ISO 27017, ISO 27018 (from a privacy perspective), the Cloud Security Alliance’s STAR program, or obtaining Service Organisation Control 2 / 3 reports as demonstration that their approach to security aligns with best practice. This is in addition to the option of undertaking government accreditation programs, such as IRAP in Australia or FedRAMP in the USA, avenues which some providers also pursue.

While this seems a logical approach, public cloud services and the shared environments they introduce create some unique considerations from a security perspective that complicate matters. Specifically, the potential security risk to any one customer of using these shared environments is inevitably closely intertwined with, and varies based on:

  • their own intended use of the service; and
  • the security risks associated with all other clients using the cloud service8.


As a result, any assessment of a cloud service provider’s security is inevitably reflective of their risk profile at a specific point in time, despite the fact that the risks facing the provider may have changed since based on its dynamic customer base. To illustrate this point, consider the hypothetical case study below.

Case study

X is a public cloud service provider that has been in business for a few years, and provides remote data storage services. X has primarily marketed itself to small businesses which make up the bulk of its customer base, and offers a highly abstracted cloud service with customers having little visibility of and ability to customise the underlying platform.

Those organisations have not stored particularly sensitive information on X’s servers. X has nevertheless obtained ISO 27001:2013 certification during this period — which includes a requirement that the cloud provider implement a risk assessment methodology and actually conducts a risk assessment process for its service on a periodical basis9.

X is then approached by a large multi-national engineering firm, who wants to store highly sensitive information regarding key customers in the cloud to reduce its own costs. The firm wishes to engage a public cloud provider that is ISO 27001:2013 compliant and notices X meets this requirement.

X is planning to conduct a risk assessment to review its current risk profile in 3 months, however, its current set of security controls — against which it obtained ISO 27001 certification — have been designed to address the level of risk associated with customers who use its cloud services for storing relatively insensitive data.

The engineering firm is unaware of this and engages X despite the fact their security controls may not be appropriately adapted to meet its requirements.

As this case study illustrates, whether it’s appropriate for an organisation to engage a cloud provider from a security perspective isn’t a question that can be answered purely by reference to whether they have been deemed compliant with certain standards. The underlying assumptions upon which the cloud provider’s compliance was determined — and whether those assumptions still hold true — are just as important. And yet in many circumstances, it is unlikely (and impractical to expect) that key documents that reveal those assumptions (such as risk registers and treatment plans) — will be made available publicly by cloud service providers so that these investigations can be undertaken by customers. And even if this information can be made available, the customer first has to have the security maturity and awareness to know to ask for such documents and be able to perform the required assessment.

Responsibility for cloud security — a two-way street

Given the limited utility of industry standards in assuring the security of cloud services, and the potential relevance of regulatory responsibilities that could apply to both service providers and their customers, the most reasonable argument is that both parties have a role to play in establishing that a particular cloud service offers an appropriate level of security. While it is difficult to define the precise scope of those responsibilities in the context of a nascent regulatory landscape, this article offers some guidance below.

Customers of cloud services

Customers need to make sure they conduct a sufficient level of due diligence prior to using a cloud service to ensure that its design is appropriately adapted to meet their needs from a security perspective. In particular, they should consider the following:

  • Does the cloud service create a high degree of abstraction from the underlying platform (public cloud services, for example, often have a high level of abstraction where users have very limited — if any — ability to configure the underlying platform). If so, this may mean the service is less suited to more sensitive uses where a high degree of control by the customer is required.
  • Is the use of a shared IT environment — in which the risk profile of the cloud service as a whole varies dynamically as its customer base changes — appropriate?
  • Are the security controls put in place by the cloud provider appropriate to satisfy the organisation’s intended use of the service?
  • Does the cloud provider make available details of security risk assessments and risk management plans?
  • Are there any other considerations that may have a bearing on whether using the cloud service is appropriate (e.g. a regulatory requirement or a strong preference to have the data stored locally rather than overseas)?

Generally speaking, the higher the level of sensitivity and criticality associated with the planned uses of a cloud service, the more cautious a customer needs to be before making a decision to use a service offered in a shared environment. If the choice is still made to proceed (as opposed to using a private cloud, for example), the reasons for this decision should be documented and subject to appropriate executive sign-off and oversight (as well as regular review). This will prove particularly valuable in case the decision is scrutinised by external bodies (e.g. regulators) at a later date10.

Cloud service providers

It is important that cloud providers are transparent with their customers about the security measures they have in place throughout the course of the period they are engaged by the customer. While representing that the cloud service is certified against particular industry benchmarks is useful to some extent, the cloud provider should also provide their own information to customers as to the specific security controls they do — and don’t — have in place, and the level of risk those controls are designed to address. In addition, cloud providers should be proactive about informing their customers where circumstances may have arisen that have resulted in a material change to their risk profile.

Providing this information is important to enable potential customers of cloud services to ascertain whether use of the service is appropriate for their needs.

Conclusion

Clearly, the shift towards the use of cloud services is now well established. This is a not a problem in and of itself. However, while regulatory expectations around cyber security are still being established, organisations need to ensure that they choose a cloud service provider only after first carefully considering what their requirements are and whether the cloud service offers an approach to security and a risk profile that is adapted to their needs. Service providers need to facilitate this process as best they can through a transparent dialogue with their customers about their approach to security and their risk profile.

By Arun Raghu, Cyber Research Consultant at Hivint. For more of Hivint’s latest cyber security research, as well as to access our extensive library of re-usable cyber security resources for organisations, visit Security Colony


  1. Note this write up focuses less on dedicated cloud environments (e.g. private cloud arrangements), where these complexities are largely avoided because a service can be customised and secured with a specific focus on a particular customer.
  2. This article does not cover this in detail, but examples include the development of the Network Information and Security Directive in the EU; the rollout of Germany’s IT Security Act; the ongoing discussions around legislated cyber security information sharing frameworks in the USA; and the proposal in late 2015 to amend Australia’s existing Telecommunications Act 1997 to include revised obligations on carriers and service providers to do their best to manage the risk of unauthorised access and interference in their networks, including a new notification requirement on carriers and some carriage service providers to notify of planned changes to networks that may make them vulnerable to unauthorised access and interference.
  3. See the regulator’s findings for details.
  4. See the FTC site for additional details on the Wyndham case.
  5. See section 18 of Schedule 2 of the Competition and Consumer Act 2010.
  6. See in particular Australian Privacy Principles 8 and 11.
  7. See Article 30 of the proposed text for the EU’s General Data Protection Regulation.
  8. The risks introduced by other clients of the cloud service may vary depending on the sector(s) in which they operate and their potential exposure to cyber-attacks as well as their intended use of the service.
  9. See in particular section 6.1 of the ISO 27001:2013 standard.
  10. A relevant consideration that may also be taken into account by regulators or other external bodies is what would reasonably be expected by an organisation of the same type in the same industry before engaging a cloud service provider — this would help ensure that unreasonable levels of due diligence are not expected of organisations with limited resources, for example.

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