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17 January 2025

Key Security Considerations For Drafting Cloud Technology Agreements

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MLT Aikins LLP

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MLT Aikins LLP is a full-service law firm of more than 300 lawyers with a deep commitment to Western Canada and an understanding of this market’s unique legal and business landscapes.
When it comes to any cloud-based platform, crafting a comprehensive agreement helps address critical security concerns.
Canada Privacy

As more organizations migrate their operations to cloud-based platforms, the importance of well-drafted technology agreements cannot be overstated. While the rapid adoption of cloud services brings unparalleled convenience and scalability, it also introduces unique security risks and challenges. To ensure your organization's interests are protected, it is essential to craft comprehensive agreements that address critical security concerns.

The selection of a service model – be it Software as a Service, Platform as a Service or Infrastructure as a Service – will influence the security responsibilities and service terms. Regardless of the model, certain contractual clauses are pivotal to safeguarding your organization's operations and data. The following are key security considerations for cloud technology agreements:

  • Data security and protection
  • Supply chain integrity
  • Identity and access management
  • Incident response and management
  • Continuous monitoring, and
  • Secure development, testing and validation

Data Security and Protection

Tailoring a layered service approach is essential for achieving data protection in cloud environments. This begins with categorically defining data at rest, data in transit, processing and storage, followed by crafting security obligations that address each scenario. Key obligations may include encryption, secure transmission methods, controlled access rights and straightforward mechanisms for reporting data protection obligations. Key contractual provisions include:

  • Encryption Requirements: Mandate encryption of data, both at rest and in transit.
  • Access Controls: Define personnel access rights and ensure secure means of reporting potential data breaches.
  • Data Sovereignty: Specify data residency and sovereignty requirements to comply with applicable laws. For example, the agreement can prohibit storage of data on physical media and ensure data centers meet industry security requirements.
  • Data Location Validation: Include clauses to prevent data transmission outside agreed geographical regions, and require the provider to offer tools for validating data location and activity records.

Supply Chain Integrity

Threat actors often exploit vulnerabilities in the supply chain to gain unauthorized access to organizational data. Provisions addressing supply chain integrity can mitigate this risk. Important security clauses to include with your cloud service provider include:

  • Supply Chain Integrity: Require the cloud provider to disclose supply chain risk management plans, ownership structures and third-party relationships.
  • Ongoing Monitoring: Grant the organization the right to conduct supply chain security assessments periodically.
  • Safeguards: Mandate the implementation of safeguards to prevent and mitigate supply chain threats.

Identity and Access Management

Identity and access management in cloud environments introduce unique security challenges due to shared responsibility models. Mismanagement of user accounts, authentication and permissions can result in security gaps. Key contractual provisions to address these concerns include:

  • Multi-Factor Authentication: Require multi-factor authentication for all access points.
  • Role-based and Behaviour-based Access: Implement access controls based on roles and user behaviour.
  • Granular Authorization Policies: Clearly delineate access management responsibilities between the parties.
  • Access Object Controls: Include policies for managing access to data and resources stored in the cloud.

Incident Response and Management

Cloud service providers must have robust incident response protocols to minimize disruptions and address security incidents effectively. Important contract terms that deal with these concerns include:

  • Disclosure Requirements: Require the provider to notify the organization of incidents affecting service availability, known vulnerabilities and relevant patches.
  • Impact Assessments: Ensure the provider discloses sufficient information to assess the severity and materiality of incidents.
  • Critical Services Oversight: For organizations in sectors such as public safety or national security, include additional oversight and information-sharing requirements.

Continuous Monitoring

Continuous monitoring of cloud services is critical for maintaining security and ensuring compliance. Access logs and monitoring tools should be standard requirements. Valuable provisions include:

  • Access Logs: Grant the organization continuous access to logs, including data on successful and unsuccessful login attempts, object access, privilege functions and system events.
  • Periodic Reporting: Require the provider to deliver periodic reports containing detailed security and operational metrics.
  • Traffic and Service Monitoring: Ensure ongoing monitoring of network traffic and application service components to detect and mitigate potential threats.

Secure Development, Testing and Validation

Cloud providers must adhere to secure software development practices to protect against vulnerabilities throughout the software lifecycle. Recommended provisions include:

  • Vulnerability Management: Require disclosure of security vulnerabilities and their potential impact on the organization.
  • Patch Management: Mandate timely implementation of security patches and updates.
  • Open-Source Security: Address the security of open-source software components within the cloud service.

Whether your organization is entering its first cloud agreement or renegotiating existing terms, having experienced legal counsel to guide the process is essential. The leading Technology, Intellectual Property & Privacy (TIPP) team at MLT Aikins is well-versed and would be happy to assist your organization in drafting and negotiating optimal technology agreements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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