5 Benefits of a Cloud Disaster Recovery Plan for Institutions

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.

Financial institutions face increasing pressure to maintain business continuity during IT outages, but the cost, complexity and regulatory requirements of disaster recovery solutions often exceed an institution's internal resources. As digital services expand and consumers increasingly rely on digital-first options, even brief downtime threatens institutional reputation, customer satisfaction and regulatory compliance. And while several options exist for disaster recovery solutions, cloud-based disaster recovery provides several distinct benefits to institutions wanting to ensure business continuity during an unexpected event.

Read on to discover the ins and outs of a disaster recovery plan and how a comprehensive disaster recovery solution benefits your institution.

What are the Goals of a Disaster Recovery Plan?

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, cyberattack or another unexpected event. 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.

Disasters like hurricanes, tornadoes and ice storms have the potential to cause catastrophic damage to organizations that find themselves unprepared. Unfortunately, recent events have shown that these disasters can happen in varying locations. Cyberattacks and data breaches also represent threats to financial institutions, especially as cybercriminals launch increasingly sophisticated schemes. According to a recent Verizon Report, 68% of breaches involved a person falling victim to a social engineering attack or making an error.

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's the Difference between Disaster Recovery and Business Continuity?

While disaster recovery and business continuity both contribute to an institution's resilience and risk mitigation, differences exist between the two concepts.

Business continuity ensures that an institution's operations remain uninterrupted, or with minimal downtime, during an unexpected outage. Disaster recovery involves the restoration of access to data or an institution's IT infrastructure after an unexpected outage or event. As such, disaster recovery is a component of an institution's overall business continuity plan and focuses on the institution's technology components.

The specifics of a DRP depend on the severity of the incident and the unique nature of business processes or technology being restored. As a result, a DRP is comprised of individual processes and procedures designed to provide a temporary process/procedure until normal operations are resumed.

Why is Disaster Recovery Important?

Financial institutions are under increasing pressure to ensure business continuity amidst rising cyber threats and IT disruptions. The demand for robust disaster recovery solutions has surged, particularly as financial institutions transition to cloud-based services and remote banking operations.

From ransomware to outdated hardware, the threats and risks facing financial institutions aren't slowing down. Institutions must be confident that their backups would be accessible in the event of an unexpected event or outage. Consider these disaster recovery stats :

• A 2023 study from LogicMonitor found that 96% of IT managers and decision-makers worldwide experienced at least one outage in the past three years.
• According to a survey by ITIC, nearly 25% of organizations associated old and inadequate server hardware with reliability issues and downtime.
• A 2022 Ransomware Trends Report found that 97% of modern ransomware attacks attempt to infect backup repositories in addition to primary systems.

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.

As mentioned above, maintaining a complete secondary datacenter is an unrealistic expense for most institutions. Further, managing disaster recovery systems in-house, especially those systems involving replication between on-premises infrastructure and cloud environments, requires advanced technical expertise that many community banks and credit unions may not have. This complexity can lead to inefficient backup processes and increases the risk of failed recoveries.

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 of Expertise: 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 advisory services partner.

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.

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