When Cloud Companies Collapse: Protecting Your Data from Digital Disasters
Preview
In this blog post, we explore the hidden risks that surface when cloud providers collapse or get acquired:
Data being transferred or sold during bankruptcy
Widened security gaps when struggling companies cut back on protection
“Deleted” data remaining stored and still treated as a valuable asset
The recent headlines around genetic testing giant 23andMe's financial struggles and the potential implications for its vast repository of sensitive client data have sent a shiver through the digital world. While the specifics of genetic information make this case particularly stark, it's far from an isolated incident. The precarious dance of cloud-based companies going out of business or being acquired poses a constant and growing threat to the privacy and security of business and personal information.
This isn't just about breaches – it's about the entire lifecycle of company and personal data. Let's delve into the multi-faceted challenges that arise when the cloud companies we entrust with our valuable information face financial hardship or a change of ownership.
An overview of the digital dilemma when the cloud fails
The Anatomy of a Digital Data Dilemma
1. The "Fire Sale" of Your Information in Bankruptcy Court
Imagine a company, teetering on the brink, seeing its assets liquidated to pay off creditors. Among those assets? Your personal data. Bankruptcy courts, while often seeking to uphold prior privacy commitments, can greenlight the sale of customer data, potentially to a new owner with entirely different ethics and practices. The 23andMe scenario is a prime example: even with stated commitments to privacy, the value of their genetic database could make it an irresistible target for acquisition, raising questions about what a new owner might do.
2. Inherited Vulnerabilities: When Mergers Mean Mayhem
A struggling company often means neglected cybersecurity. When an acquisition takes place, the new owner might inherit a treasure trove of data vulnerabilities along with the new business. The infamous Marriott-Starwood merger serves as a chilling reminder. Years after the acquisition, a massive data breach of the Starwood database was uncovered – a breach that had occurred before Marriott even took over. The acquiring company was left to manage the fallout, underscoring the critical need for thorough cybersecurity due diligence during M&A.
3. The Fine Print Fallout: Ambiguous Privacy Policies and Implicit Consent
How many of us truly read every word of a privacy policy? Most include clauses allowing data transfer during mergers, acquisitions, or bankruptcy. Users often click "agree" without fully grasping the implications. While companies like 23andMe might promise not to sell sensitive data without "explicit consent," the lines can blur. Is consent to participate in research also consent for data transfer in a bankruptcy? Legal experts often argue that the "choice" presented to consumers may not be as robust as it seems.
4. The Illusion of Deletion: When "Goodbye" Isn't Forever
You want your data gone? It's not always that simple. Deleting an account may not fully erase all your information. Companies might retain de-identified or aggregated data, which, while not directly linked to you, remains a valuable asset. While experts advised 23andMe customers to delete their accounts, the reality is that some genetic information, stripped of direct identifiers, might persist and could still be part of a company's assets.
5. Business Interruption and Vendor Lock-in Nightmares
Beyond personal data, businesses relying on cloud services face operational nightmares when a provider collapses. The sudden shutdown of a service can halt critical business processes, leaving companies scrambling to retrieve data and find a new vendor. The swift demise of cloud storage provider Nirvanix years ago, which gave clients mere weeks to migrate massive amounts of data, highlighted the severe risks of vendor lock-in and the need for a robust exit strategy.
6. The Financial Data Front: The Celsius Network Case
The challenges aren't limited to genetic data. The bankruptcy of cryptocurrency lending platform Celsius Network in 2022 revealed plans to sell customer data as part of its assets. This case underscored how financial data – transaction histories, holdings, personal details – becomes a commodity in distressed situations, prompting the appointment of a consumer privacy ombudsman to oversee the data's fate.
The Unseen Threat: Navigating Third-Party Risk
A company's risk doesn't stop with its direct service provider. It extends to the entire supply chain of data. Many businesses contract a cloud company for services, who in turn subcontract to a third-party for specialized functions like data processing, analytics, or even storage. This creates a complex chain of custody, and a security vulnerability at any link can expose all the data in the chain.
For example, a marketing firm might use a cloud provider to host its customer data. That cloud provider might then use a third-party service for analytics. If that analytics company is breached or goes out of business, the original marketing firm's customer data is at risk, even though it never had a direct relationship with the analytics company. This is why third-party risk management is a critical component of cybersecurity.
An overview of the different ways to mitigate cloud risks
Conclusion: Fortifying Your Digital Future
The incidents above paint a clear picture: relying on cloud-based companies, while convenient and often essential, comes with inherent risks. Both individuals and businesses must be proactive.
Key Ways Companies (and Individuals) Can Prevent or Mitigate Risks:
Robust Due Diligence: Before partnering with any cloud provider, scrutinize their security practices, financial stability, and, critically, their data retention and transfer policies in the event of bankruptcy or acquisition. Don't just read the privacy policy; understand its implications.
Data Portability and Exit Strategies: Ensure that your contracts with cloud providers include clear provisions for data portability. You should be able to easily extract your data in a standard format if you need to switch providers or if the current one goes out of business. Plan for a "digital divorce" from day one.
Diversification and Redundancy: Avoid putting all your eggs in one cloud basket. For critical data and services, consider using multiple providers or maintaining on-premise backups to reduce reliance on a single vendor.
Strong Encryption and Access Controls: Encrypt your data both in transit and at rest. Even if data is compromised or sold, strong encryption makes it significantly harder for unauthorized parties to access. Implement robust access controls, ensuring that only necessary personnel can view or manage sensitive information.
Regular Data Audits and Deletion Policies: Periodically review what data you are storing and whether it's still necessary. Implement clear data retention and deletion policies. For individuals, regularly review and prune your digital footprint, requesting data deletion where appropriate.
Leverage Legal Protections (e.g., GDPR, CCPA): Understand your rights under regulations like GDPR and CCPA, which give individuals more control over their personal data, including the right to access and delete it. Companies must also ensure their practices comply with these regulations.
Stay Informed: Keep abreast of the financial health of your critical cloud providers and any news regarding mergers, acquisitions, or breaches. Proactive awareness can provide valuable lead time to adjust your strategies.
Vet Your Entire Supply Chain: Businesses must extend their risk assessment beyond their direct vendor to any sub-processors or third parties they use. Ask tough questions about their security protocols, financial stability, and data privacy policies. A chain is only as strong as its weakest link.
The digital landscape is constantly evolving, and with it, the challenges to data privacy. By understanding the risks and implementing proactive measures, we can better protect our most valuable asset in the cloud: our information.
Summary
When a cloud provider collapses or gets acquired, your data can quickly become collateral—sold, exposed, or trapped with little warning. Recent events like 23andMe’s financial troubles show just how fragile our digital ecosystem really is. Understanding these hidden risks is key to protecting your information before a crisis hits.
