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Cloud concentration risk: A framework agent-based model for systemic risk analysis

Author

Listed:
  • Harmon, Richard L.

    (Global Head of Financial Services, Cloudera, UK)

  • Vytelingum, Perukrishnen

    (Head of Quantitative Modelling, Simudyne, UK)

  • Babaie-Harmon, Jiyan

    (Simulation Engineer and Operations Manager, Simudyne, UK)

Abstract

This paper provides a brief overview of key trends in cloud adoption and cloud deployment strategies, how global regulators are evaluating cloud-related operational risks and how might they deal with these potential risks in the future. Furthermore, the role of recent innovations in the Big Data and Analytics space has resulted in a next generation hybrid, multicloud architecture that addresses many of the near-term operational risks that regulators have identified with public cloud adoption. The last section of this paper outlines a framework agent-based model (ABM) that can be the foundation for regulators, market participants and cloud service providers (CSPs) to evaluate these types of risks. This approach can identify potential contagion trigger points that can lead to cloud-driven systemic risk events. The authors demonstrate how this framework ABM can be extended to evaluate regulatory policies under different criteria and market structures. Future research points to the integration of Evolutionary Game Theoretic configurations that could help determine the effectiveness of potential regulatory policies as well as identify circumstances where suboptimal regulatory and compliance outcomes arise.

Suggested Citation

  • Harmon, Richard L. & Vytelingum, Perukrishnen & Babaie-Harmon, Jiyan, 2021. "Cloud concentration risk: A framework agent-based model for systemic risk analysis," Journal of Financial Compliance, Henry Stewart Publications, vol. 4(3), pages 232-256, March.
    • Handle: RePEc:aza:jfc000:y:2021:v:4:i:3:p:232-256
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    More about this item

    Keywords

    cloud outsourcing; operational resiliency; regulatory oversight; cloud concentration risks; agent-based simulation modelling;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K2 - Law and Economics - - Regulation and Business Law

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