It is that tradeshow time of year when specific communities disappear out of the office to meet up with other people to do the physical rather than virtual/social networking. This last week it was SIBOS, the annual event for payments and transaction banking facilitated and organised by SWIFT. This year the SIBOS camp set up its stall in Amsterdam and generated quite a flurry of press releases and PR activity. For more details you can go to Finextra.com's own http://www.sibosonline.com/ which is devoted to comment and video for those not able, or not willing to attend. Amongst the news coming out of SIBOS, I was interested to see the further increase in emphasis on providing services via the “cloud” or services accessed across the web, also known as Software as a Service (SaaS). As reported, the theme of the keynote sessions was that cloud is no longer a trend, but a business requirement for banks. There are multiple reasons why firms will adopt cloud, including reduction in capital expenditure, but I would like to concentrate here on the arguments that cloud reduces operational risk and also complexity.

The operational risk argument goes that because someone else is running and maintaining the hardware and software for you it lowers the risk of failure – but is this always true? Well the simple truth is that it depends. If you are a small organisation that cannot afford to invest in a significant technology support department and you have selected an appropriate vendor who has local support in your time zone, then yes your risk may be reduced.

The complexity argument is also not quite so clear cut, particularly when an organisation looks at using a range of cloud applications for different functions e.g. trading, reporting and settlement. Each of these will require a different interface and a different application front end and typically the different applications will not be able to easily share data. Take for example, the scenario where you need to identify information from a number of suspect trades across the various systems. This can generate the need for significant and complex manual workarounds which reduce the expected benefits.

So, using the “cloud” can be immensely beneficial, if used for the right functionality and if it is properly implemented and has local support in your time zones. However, simply using cloud does not suspend the normal rules of risk and complexity – it just gives you different opportunities.