Protecting your IaaS business: A comprehensive IaaS risk management guide

Cloud computing has transformed the IT industry, and Infrastructure-as-a-Service (IaaS) is at the heart of it all. IaaS provides businesses with improved computing power and cloud storage, making it easier and less expensive for those businesses to scale their operations without the need to manage physical servers. 

But with this growth comes a unique set of challenges. From data breaches and system failures to regulatory compliance and customer disputes, IaaS providers face a complex risk landscape. 

That said, while certainly convenient, IaaS has risks. Cloud providers do offer some built-in protection, but securing an IaaS environment is generally a shared responsibility — making it increasingly important to understand how to manage IaaS risk effectively.

In this IaaS risk management guide, we’ll identify some of the common vulnerabilities associated with IaaS and lay out some clear steps for creating an effective risk management plan. By the end of this article, you’ll be much better equipped to manage and mitigate any risks your IaaS company faces.

Common IaaS risks

The IaaS industry is vulnerable to a wide range of threats. Let’s take a close look at some of the most common risks in IaaS and cloud computing.

Regulatory compliance risks

Keeping up with compliance is another major challenge for IaaS companies. The regulatory landscape is constantly changing, and IaaS companies have several very specific regulations they need to follow. Failing to comply can result in hefty fines and may cause your customers to lose trust in your company.

Unlike other risks that you’ll have more control over, compliance is a moving target in the IaaS industry.

The specific regulations that your company must follow will differ depending on your industry and the regions in which you operate. Here are a few regulatory bodies that you should know about as an IaaS business owner:

• GDPR: The General Data Protection Regulation is the EU’s data regulator. It’s crucial to comply with GDPR regulations if your IaaS company processes or stores the data of customers in the EU. A fine from GDPR may set you back up to 20 million euros.
• HIPAA: The Health Insurance Portability and Accountability Act regulates health care data in the U.S. Any company that collects or processes health-related information must comply with HIPAA.
• CCPA: While the U.S. doesn’t have a specific federal data protection agency, certain states do. For instance, California’s data regulatory body is the California Consumer Privacy Act, which means that if an IaaS company has any customers in California, it must follow CCPA.
• PCI-DSS: The Payment Card Industry Data Security Standard is a global regulation. It ensures that businesses process, store, and transmit credit card data safely and securely. IaaS providers handling payment information must comply with PCI-DSS to prevent fraud, data breaches, and unauthorized access.

Operational risks

IaaS companies provide an essential service that has become an important part of many business operations. Companies can now rely on cloud computing technology to store data securely and safely. That said, when an IaaS provider experiences a server outage, it can severely disrupt business operations for clients, leading to loss of revenue and potential lawsuits

Since so many individuals and companies rely on IaaS, a kink in the system — such as a misconfiguration, server error, or data loss — can have far-reaching consequences, putting an IaaS company at serious risk.

Data security risks

The main purpose of IaaS is to make data storage easier and more accessible. That said, while cloud computing is one of the most secure ways to handle data, there may still be data and cybersecurity risks. 

It is important to note that cloud storage is generally extremely secure — it’s why even the U.S. Army trusts IaaS companies to hold and transfer contracts and classified data. But a single data breach or cyberattack can obliterate an IaaS company’s reputation and result in massive fines and legal penalties. 

In 2024, for example, AT&T paid a $13 million fine to the FCC after a data breach at their third-party cloud vendor exposed information on 8.9 million customers. 

Bypassing virtual machines (VMs), containers, or sandboxes

IaaS companies generally store the data of multiple customers on a single physical device. They then use digital barriers to separate each customer’s data. These barriers are called virtual machines, containers, or sandboxes, and they’re designed to isolate each customer’s data and prevent them from gaining unauthorized access to the broader system. 

A major vulnerability faced by IaaS companies is the potential for clients to bypass these digital barriers and access another user’s data — or even the entire cloud infrastructure. 

This can lead to devastating consequences, including major data breaches, operational downtime, and loss of sensitive data.

Lack of control

In the past, most companies managed their own servers on-site, so they had full control over how their data was handled and stored. One of the biggest trade-offs of IaaS is that businesses no longer have full control over the infrastructure they rely on. This means if a third-party IaaS vendor experiences an outage, a security breach, or a system failure, any company using their infrastructure will also be affected with little ability to intervene. 

The shared risk responsibility model in IaaS explained

IaaS risk management is unique because security and compliance responsibilities are generally shared between the cloud provider (IaaS company) and the customer using IaaS. Unlike traditional IT, both the provider and the customer have a role to play, and understanding this shared responsibility model is crucial for effective risk management. But which parties are responsible for which risks?

• IaaS provider’s responsibilities: Securing the physical infrastructure (data centers, hardware, networking, and virtualization layers). The cloud provider ensures the servers are physically secure and operational.
• Customer’s responsibilities: Protecting what they build and store in the cloud. This may include configuring security settings, managing data, restricting access to data, and more.

How to create an IaaS risk management plan

Step 1: Assess IaaS risks

Before you can effectively manage risk, you need a clear picture of the threats your IaaS business faces.

One of the easiest ways to get started is by using a Risk Profile to identify potential vulnerabilities and coverage gaps. This free tool helps IaaS companies proactively assess risks and refine their security strategies before issues escalate.

 Not all risks carry the same weight. Some may only result in minor operational disruption, while others can have serious financial consequences. This is why it’s essential to assess your risks so that you can determine which are the most pressing.

There are two main ways to evaluate the severity of threats in your risk management plan.

Quantitative risk assessment:

The ideal risk assessment approach for most businesses is quantitative risk assessment, which uses hard data and statistics to measure the potential impact of a risk. For IaaS businesses, quantitative analysis might include:

• Estimating financial damage from a cyberattack or data breach, such as lost revenue and regulatory fines.
• Calculating downtime costs for events such as server failures or cloud outages.
• Assessing the potential cost of vendor lock-in, such as the cost of migrating to a different provider if prices increase or services become unreliable.

Qualitative risk assessment:

If quantitative risk assessment is not possible, companies may use qualitative methods instead. However, since qualitative risk assessment is more subjective and doesn’t rely on cold hard data, it’s often less accurate. With qualitative risk assessment, businesses will rank risks based on their perceived threat level.

Step 2: Prioritize risks

Once you’ve determined each risk’s threat level, you’ll need to prioritize the risks and figure out where to allocate your resources. During this stage, you can determine which risks are worth taking, which you need to mitigate, and which you should avoid taking altogether. The two main factors to look at when prioritizing threats are the potential impact they may have and how likely they are to occur. 

For example:

• A minor service delay caused by network congestion may be more common, but it’s a low threat since it only causes brief slowdowns rather than full outages. While this risk is worth monitoring, it isn’t a high-priority issue that requires immediate action.
• A catastrophic data center failure caused by a natural disaster or cyber attack is a rare occurrence, but since it poses such a high threat, you’ll want to have a disaster recovery plan in place to help you respond to the situation if it occurs.

Step 3: Use mitigation strategies

Now that you’ve ranked potential risks and determined which threats need to be addressed, it’s time to actually start taking steps toward preventing them. You may be able to avoid some risks entirely, but for most IaaS risks, you’ll need to minimize the damages.

Here are a few ways to mitigate IaaS risks:

• Develop an effective incident response plan. If you aren’t properly prepared for an incident, the damages will likely be far more serious. One of the best ways to mitigate IaaS risks is to ensure that you and your team are properly equipped and trained. Check out our guide on creating a cyber incident response plan for more on this. 
• Invest in DDoS protection. A Distributed Denial of Service (DDoS) attack can overwhelm and disrupt cloud systems. To prevent this type of cyber attack from occurring, you can implement firewalls and traffic filtering.
• Have a backup plan. Things like failover systems, automated backups, and disaster recovery plans can ensure the cloud system remains active even in the event of a failure.

Step 4: Transfer risk with business insurance

As we mentioned, there are some risks that you simply won’t be able to avoid. With cyber threats on the rise and new risks constantly emerging, it’s always important to be prepared for the worst-case scenario.

You can think of business insurance as a protective measure for when all else fails. While you should certainly work to mitigate risks and have a solid incident response plan, an insurance policy can be a saving grace when an unexpected event occurs.

Unfortunately, the IaaS risk landscape is unpredictable, so insurance can give you peace of mind that your business’ assets are protected no matter what.

Here are some of the most important insurance policies for cloud providers invest in:

• Cyber liability insurance: Protects IaaS providers from financial losses caused by data breaches, cyberattacks, and unauthorized access to customer data. Cyber insurance covers resulting costs, including legal fees and fines.
• Technology errors and omissions: Covers claims for things like misconfigurations, service outages, cloud infrastructure failures, and other errors that cause financial losses for customers using the IaaS service.
• Business interruption insurance: Pays for lost revenue and ongoing expenses if an IaaS provider has an outage, the cloud infrastructure fails, or a natural disaster stops you from doing business.
• Directors and officers insurance: Protects the executives and core leaders of an IaaS company from lawsuits and financial losses.

Benefits of risk management in the IaaS industry

With so many emerging threats, risk management is simply nonnegotiable in just about every industry nowadays, including IaaS. A strong risk strategy starts with knowing your vulnerabilities. A Risk Profile provides instant insights into your IaaS risk landscape, helping you take action before threats escalate. Developing a risk management strategy for your business will allow you to tackle threats before it’s too late and prevent them from wreaking havoc on your business.

Here are some of the main reasons why risk management in IaaS is essential.

Minimizes downtime and service disruptions

Downtime in IaaS caused by server failures, misconfigurations, or cyber attacks can be costly for both the business using the service and the cloud provider itself. Service disruptions often lead to contractual penalties and cause operational struggles. A well-thought-out IaaS risk management plan can help mitigate service disruptions and reduce the amount of damage they cause.

Risk management helps IaaS businesses identify vulnerabilities and implement operational backups such as failover mechanisms. Additionally, risk management plans can significantly improve your business continuity, ensuring that when disruptions occur, your business can recover faster and resume normal operations with minimal delays. 

Reinforces cloud security measures

A well-structured risk management strategy allows IaaS companies to proactively address risk. The earlier your security team can identify threats, the easier it is to mitigate them. You’ll be able to implement security controls that specifically target high-risk areas of the infrastructure. 

Instead of reacting to IaaS security incidents as they occur, a proactive approach attempts to prevent them altogether, stopping threats at the door.

Safeguards sensitive data

When it comes to data security, IaaS companies don’t get second chances. A single data breach can have a devastating impact on businesses using IaaS and the cloud provider itself. Data breaches or cyber attacks in the IaaS industry can be catastrophic, so it’s important to stay ahead of threats. That AT&T’s 2024 data breach we mentioned earlier? While it was caused by a third-party cloud vendor’s security failure, AT&T had to take the hit: The incident led to a $13 million fine and a major PR crisis.  While this incident may not have been fully avoidable, a better risk management plan could’ve helped the company minimize the impact.

Best practices for IaaS risk management

Here are some key strategies to stay ahead of risks in the IaaS industry.

• Train your team: Your employees are your first line of defense when it comes to risk management. Invest in cybersecurity training and ensure your team understands how to respond to outages, misconfigurations, and security threats.
• Automate risk management where possible: Manual processes can be slow and error-prone. Luckily, recent technological advances have completely transformed the risk management industry. Use AI-driven monitoring, automated compliance tools, and real-time alerts to detect and mitigate risks faster. 
• Regularly review your plan: Creating an effective risk management strategy is an ongoing process. Once you have a plan in place, you should constantly update it to ensure it stays effective. New threats emerge constantly, so make sure to adjust your mitigation strategies periodically.

Protect your digital infrastructure with effective risk management

Proactive risk management keeps your IaaS business secure, compliant, and financially stable. With an effective risk management strategy, you can identify threats before they occur, prioritize risks, and put the right protections in place, helping you avoid downtime, security breaches, and costly fines.

The best way to protect your business is to stay ahead of risk. Embroker’s Risk Profile tool makes it easy to assess your vulnerabilities and strengthen your risk management strategy. Don’t wait for a problem to arise. Take control of your IaaS risks before it’s too late.