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Cloud concentration risk: A framework agent-based model for systemic risk analysis
Journal of Financial Compliance,
4
(3),
232-256
(2021)
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.
Keywords: cloud outsourcing; operational resiliency; regulatory oversight; cloud concentration risks; agent-based simulation modelling
The full article is available to subscribers to the journal.
Author's Biography
Richard L. Harmon is the Global Head of Cloudera’s Financial Services Industry vertical and works closely with most of the top 100 global banks and leading regulators to help drive innovation on Cloudera’s globally leading Big Data and Analytics platform. He joined Cloudera on May 2016, and has over 25 years of experience in Capital Markets with specialisations in Risk Management, Advance Analytics, Simulation Methods, Fixed Income Research and Customer Behavioural Analytics. Richard started his career at the Federal Reserve Bank of New York followed by leading fixed income and mortgage research teams at Citibank, Bankers Trust, JP Morgan and Bank of America/Countrywide Capital Markets. He is the cofounder of Risk Monitors, a General Motors Acceptance Corporation-funded Risk Management and Analytics startup, which was acquired by BlackRock, where he was a managing director and partner in the Risk Management Group. Richard left Blackrock to start and manage the North American business for Norkom Technologies, which was later sold to BAE systems. Starting in 2010, Richard was the Director of SAP’s Europe, Middle East and Africa (EMEA) Capital Markets group, where he helped grow the business across the EMEA region. Richard has published extensively on a wide range of financial services topics and is frequently an invited speaker at many leading industry events. He holds a PhD in Economics with specialisation in Econometrics from Georgetown University, Washington, DC, USA.
Perukrishnen Vytelingum received a Master of Engineering degree in Information Systems Engineering (first-class honours) from Imperial College London, London, UK, and a PhD degree in Artificial Intelligence (AI) from the University of Southampton, Southampton, UK. He spent some time in academia as a Senior Research Fellow in the IAM Group, University of Southampton where he published over 30 peer-reviewed papers in the top AI journals and conferences. Thereon, he joined the industry as a Credit and Market Risk Quantitative Developer at Sungard/FIS and later as a Market Risk Quant at J.P. Morgan and is currently the Head of Quantitative Modelling at Simudyne. His main interests include agent-based modelling, market mechanism design, Evolutionary Game Theory and market simulations.
Jiyan Babaie-Harmon is a Simulation Engineer as well as Operations Manager at Simudyne. He joined Simudyne in 2017, after receiving his degree in biomedical sciences at Auburn University, Auburn, Alabama, USA. He focuses on building agent-based simulations in the Simudyne SDK across a wide variety of applications and use cases that include finance, health and life sciences and defence. He graduated from the Barclays Techstars ‘17 accelerator programme and is a graduate of the University of Cambridge Judge Business School Executive Education Program. His main research interests include agent-based modelling and the study of Complex Adaptive Systems in Finance and the Biological Sciences.
