Risk management in the public cloud is your job

I was excited to speak at a regional cloud computing summit hosted by one of the major cloud providers. My presentation focused on the many opportunities of public cloud and the essential need for risk management. Just before the event, I received an email stating that three of my slides, which discussed cloud outages and the risks of over-reliance on providers, had to be removed. Mentioning failures didn’t align with the host’s narrative of reliability.

Frustrated but not surprised, I removed the slides. During my presentation, I highlighted the importance of preparing for outages, disruptions, and other potential risks. I shared real-life incidents, such as major outages at top providers, that demonstrated how businesses unprepared for third-party failures can face significant financial, operational, and reputational damage. The audience’s response was mixed. Some nodded, clearly understanding the risks. Others, including event organizers at the back, appeared uneasy. Unsurprisingly, I haven’t been invited again.

Here’s the truth: Managing risk isn’t about doubting the effectiveness of cloud providers—it’s about ensuring resilience when the unexpected happens. If sharing that message makes people uncomfortable, I know I’m doing my job.

Reality does not care about your bias

Here’s another truth: Cloud outsourcing doesn’t eliminate risk; it simply shares it with the provider. The shared responsibility model of cloud governance clarifies certain aspects of risk management. A public cloud provider guarantees the reliability of their infrastructure, but the responsibility for the operating environment—applications, data, and workflows—still rests with the customer organization.

For example, providers will ensure their data centers meet uptime requirements and can withstand disasters at the physical or infrastructure level. However, they cannot control how a business organizes its data, enforces access policies, or mitigates the ripple effects of service provider outages on critical workflows. Businesses still bear the responsibility of maintaining continuity in the event of unexpected technical incidents.

Public cloud providers excel at scalability and innovation, but they aren’t immune to outages, latency issues, or cybersecurity risks. Organizations that fail to prepare for such possibilities become vulnerable to operational, financial, and reputational damage.

High-profile cloud incidents

Recent history provides clear examples of the risks associated with over-reliance on public cloud providers.

AWS outage (December 2021): The reliability of one of the world’s largest cloud providers came into question during this outage. Many businesses, including cloud-dependent logistics firms and e-commerce platforms, experienced service disruptions that halted deliveries and hampered operations during the critical holiday season.

Azure downtime (2022): A system failure in Microsoft Azure impacted SaaS applications and global enterprises alike, with financial services and regulated industries experiencing significant disruptions. These setbacks exposed the risks of relying heavily on a single provider.

Google Cloud outage (2020): This incident disrupted major platforms such as Gmail and YouTube, as well as third-party applications operating on Google Cloud. Businesses without backup plans faced revenue losses.

Such incidents underscore the primary risks associated with relying on third-party cloud vendors. Despite their technological sophistication, the providers are not infallible, and their failures can have a direct impact on dependent businesses.

The ripple effect of third-party failures

When third-party providers face disruptions, the impact can be extensive. Public cloud providers are the foundation of many industries today, so any failure creates a ripple effect across organizations, markets, and consumers.

Operational delays: Interruptions to essential services lead to productivity losses and, in some cases, operational paralysis. This is especially noticeable in industries such as healthcare or finance, where downtime can have serious real-world consequences for customers or lead to regulatory noncompliance.

Financial losses: The cost of cloud-induced downtime can reach staggering levels. In highly regulated industries, losses can surpass millions of dollars per hour, considering missed business opportunities, regulatory fines, and remediation efforts.

Regulatory and compliance risks: Certain industries are subject to stringent compliance standards. An outage caused by a third-party provider could prevent organizations from meeting these requirements, resulting in significant penalties and legal risks.

Reputational damage: Customers and stakeholders often associate poor service with the business even if the issue lies with the cloud provider. Recovering from reputational loss is an expensive, extended process that can impact long-term business viability.

Concentration risks: Relying too heavily on a single cloud service creates a single point of failure. If that provider goes down, operations in the dependent organization could come to a complete halt.

Risk management remains critical

Migrating systems to public cloud platforms does not exempt organizations from the need to build strong risk management frameworks. Viewing public cloud providers as strategic partners rather than infallible utilities helps businesses safeguard themselves against downstream risks.

Thoroughly evaluate vendors: Look beyond their current service offerings to document their resiliency plans, security practices, and compliance certifications.

Diversify cloud investments: Many organizations now adopt multicloud or hybrid solutions that combine services from multiple providers. This minimizes the risks of relying on a single provider and increases flexibility during incident recovery.

Develop incident response plans for cloud disruption: Business continuity strategies should cover potential cloud outages, simulate disruptions, and establish clear action plans for rerouting workloads or restoring operations.

Monitor cloud vendor dependencies: Consider active monitoring solutions to identify vulnerabilities or performance issues within your cloud ecosystem before they lead to outages.

Engage in contractual risk protections: Contracts with public cloud providers should clearly define recovery expectations, contingency plans, and resolution timelines to ensure effective risk management. Auditing rights and regular performance evaluations must also be included in these agreements.

Prioritize data and infrastructure backups: Data replicas and backup systems independent of your primary cloud service lower the risk of business stagnation during a disaster.

Outsourcing to the public cloud provides enterprises with opportunities to become more efficient and flexible; however, the inherent nature of cloud services requires careful oversight. The public cloud connects a business to global ecosystems where minor disruptions can lead to much larger problems. Effective use of cloud services doesn’t mean outsourcing responsibility. It involves taking proactive steps to reduce risks from the start. Only then can organizations fully realize the benefits of the public cloud, without compromising operational security or long-term success.