Any business that maintains and uses data should technically have a means of backing up and recovering that data in the event of a disaster. For financial institutions like banks and credit unions, creating a disaster recovery plan is a must.
The goal of a disaster recovery plan (DRP) is simple: ensure your institution has a structured plan to recover business operations in the event of a disaster or cyberattack. And one of the main elements of a successful DRP lies in your institution’s ability to back up your IT environment and recover data.
But, thanks to advances in virtualization and cloud technologies, modern data recovery options are now affordable for most banks and credit unions seeking to update their DRP.
What is Disaster Recovery for Banks and Credit Unions?
It’s no secret that the financial sector has prioritized digital channels. Managing data is now fundamentally important, both from a customer experience and a compliance perspective. Therefore, financial institutions of every size must prioritize and plan for efficient and rapid disaster recovery to meet compliance requirements, minimize downtime and—most importantly—meet the expectations of customers during and after a disaster or disruptive event.
Even though disasters like hurricanes, tornadoes and ice storms tend to be rare, they have the potential to cause catastrophic damage to organizations that find themselves unprepared.
Cyberattacks and data breaches, on the other hand, occur with a frenzied frequency. According to a recent Verizon Report, 58% of all data breaches in 2020 targeted personal data.
But maintaining a DRP isn’t just good for risk management: there are compliance considerations as well. Though disaster recovery planning for financial institutions is not as all-encompassing as business continuity planning, it is still required by regulators. And mandates surrounding financial data have all but intensified in recent years. GLBA, FFIEC, EFA and a host of other compliance requirements specific to financial institutions increase the compliance liability of banks and credit unions nationwide.
Due to the high degree of regulatory scrutiny associated with data recovery and storage, it is imperative that any disaster recovery component of your DRP handled by a managed service provider meet the same compliance standards as your institution—such as SOC 2 and other auditing requirements.
What is the Best Disaster Recovery Solution for Banks and Credit Unions?
Currently, financial institutions have a few options for storing and recovering data during a disaster:
- On-Premises Data Backup and Recovery: Data is backed up locally and transported to a storage medium. In this scenario, data can be restored via the backup, but there is no capability of recovery if the servers themselves are damaged or fail.
- Maintaining a Secondary Datacenter: Institutions own backup servers that exist solely to support the IT environment during a crisis or disaster. Managed and operated by internal staff members, these servers are usually located away from the main datacenter to mitigate the risk of a localized disaster.
- Cloud Data Backup and Recovery: Usually hosted by a third-party cloud provider, a cloud recovery solution acts as an “as needed” safeguard during a disaster. Cloud servers can be used in tandem with a physical backup (known as a hybrid system) or as a complete data backup of your entire IT environment.
For most institutions, maintaining a complete secondary datacenter is an unrealistic expense. The only true data recovery options for small to mid-sized institutions center around cloud vs. on-premises. But which option provides the best security, reliability and return on your investment? As the volume, complexity and business value of data continues to increase, the prevalence of implementing a cloud disaster recovery solution is increasingly apparent.
Disaster Recovery Planning: Cloud vs. On-Premises
While on-premises, secondary datacenter and cloud data disaster recovery options are viable in today’s data-first financial sector, the cloud recovery option offers a few unique advantages to institutions of every size.
1. Geo-Separation: Most financial institutions, especially community banks and credit unions, maintain branches within a specific geographic location. If a catastrophe occurs (a tornado, hurricane, ice storm, etc.) there is a good chance they will lose multiple branches simultaneously. That means any on-premise servers were likely a casualty of the disaster. In this situation, a cloud recovery solution shines because cloud servers are usually hosted in multiple FEMA Zones, assuring no single catastrophic event would wipe out all your data or render it unrecoverable.
2. Ease of Data Transfer: Hopefully your institution will never need to utilize a disaster recovery backup, whether on-premises or cloud-based. If the need does arise, cloud recovery offers a secure, encrypted and fast backup option. And because most cloud backups are managed by a third-party provider, a cloud hosting environment is generated quicker than most on-premise solutions. In addition, most cloud recovery solutions offer a simple means of switching data back to your main datacenter once a disaster has lifted.
3. A Deep Bench: Many financial institutions don’t have the luxury of a deep bench of internal staff members dedicated to executing a disaster recovery plan. And while large-scale disasters are rare, even the occasional server malfunction or hardware issue can put undue strain on your employees. Gaining the help of an experienced vendor that provides cloud disaster recovery as a service can take the burden off your staff by summoning a data recovery dream team on demand.
4. Cost Efficiency: For community banks and credit unions, the upfront costs associated with on-premises disaster recovery infrastructure can be massive. Using a cloud recovery solution can decrease overall costs because vendors usually charge a small retainer for access to the service, meaning that the institution only incurs additional cost when the cloud recovery system is put into production.
5. Compliance Standards: Most cloud recovery vendors specific to banks and credit unions will review and update their cloud environment to ensure compliance, auditing and financial industry standards are implemented. These regulatory updates are advantageous to smaller institutions that are unable to dedicate employee bandwidth to ensure compliance standards are up to par. As a best practice, ensure your institution’s disaster recovery plan is up to date and ready annually, either internally or through a qualified vCIO service provider.
The Final Word on Cloud Backup and Recovery
For many IT executives, disaster recovery can feel a lot like insurance, even though it’s a regulatory requirement for financial institutions. But the utility of data backup and recovery extends beyond the realm of the catastrophic.
For example, minor inconveniences like the accidental deletion of data and hardware or software failure are enough to cause undue strain on internal IT staff. Even the loss of a single server can disrupt your business operations, damaging the customer experience and hurting your institution’s bottom line. Therefore, data backups are a must. Cloud backups in particular are excellent tools for managing these minor inconveniences because they allow any server to be accessed and temporarily run on a secure environment or backup data to be recovered as needed.
The bottom line: managing and storing data in the financial sector is a dynamic challenge that will only increase as digital channels blossom. Cloud data recovery offers a flexible, cost-effective and scalable option for your institution’s disaster recovery plan.
Steven Ward has over 29 years’ experience in technology with 14 years in community banking technology and currently serves as CSI’s vCIO manager.