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In the ever-evolving landscape of financial services, ensuring operational resilience has become a top priority. One significant factor in this is access to data held by service providers, particularly during disruptions. This article explores the various strategies and regulations that aim to address this critical issue.
Financial service providers in Germany, and indeed across the European Union, can ensure access to data held by their service providers by complying with the EU Data Act, effective from September 12, 2025. This legislation mandates fair access to data, transparency, interoperability, and contractual arrangements with third parties, including cloud service providers.
However, the importance of data access extends beyond compliance. Business continuity and exit planning are key components of ensuring data access and use during disruptions. Regulatory requirements for outsourcing and material technology contracts in the financial services sector often include appropriate business continuity and exit planning provisions.
Scenario A illustrates the mitigation of temporary disruption caused by unplanned system downtime with quick activation of a business continuity plan and support from the service provider. On the other hand, Scenario B demonstrates the impact of repeated emergency maintenance leading to a planned exit, where insufficient data access led to substantial additional and unanticipated costs. These scenarios underscore the importance of robust data access provisions.
Escrow providers have developed new cloud escrow models, including the "access" model and the "replicate" model, to address this shortcoming. The "replicate" model, where the escrow provider sets up a mirrored instance of the cloud-based software, eliminates the risks present in the access model but requires regular updating of the code and data in the replicated instance.
In a SaaS arrangement, customers should be able to view and download their data during the term of the contract, while in a business process outsourcing, data may only be accessible by the service provider on its own technology. In such cases, escrow arrangements can be used to ensure data access in case of service provider insolvency or other issues that prevent data access.
Businesses critically impacted by the loss of access to data on a cloud-based platform may wish to investigate escrow as a potential mitigation strategy. However, traditional source code escrow is of little use in the context of a cloud-based platform or SaaS because it cannot be operated independently of its hosting environment.
Effective provisions ensuring access, recovery, and return of data in a stressed exit scenario need to address multiple types of data access, including direct and conditional access. These provisions should also include ancillary obligations supporting prompt data supply, such as keeping customer data segregated, using systems for efficient extraction, copying, and transferring, and using appropriate measures to ensure data integrity.
In various scenarios, access to data held by service providers is crucial for operational resilience, especially during disruptions caused by service providers. The UAE Central Bank, UK's Prudential Regulation Authority (PRA), Digital Operational Resilience Act (DORA), and European Banking Authority's guidelines on outsourcing arrangements may impose express requirements on financial entities to ensure access to data held by their service providers.
In conclusion, the importance of data access for operational resilience in the financial services sector cannot be overstated. Compliance with regulations, robust business continuity and exit planning, and the use of escrow arrangements are key strategies for ensuring uninterrupted access to critical data. As the landscape continues to evolve, it is essential for financial service providers to stay abreast of these developments to maintain operational resilience and safeguard their businesses.
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