Cloud computing offers businesses better scalability, flexibility and cost efficiency but, as the CrowdStrike global IT outage in 2024 demonstrated, it also brings risk, especially for complex supply chains.

Despite their reliability, global giants like Amazon and Microsoft aren’t infallible and your business could be vulnerable if operations rely on the cloud. So, what are the risks, and how can you mitigate against them?

How safe is cloud computing?

Businesses around the world are increasingly moving operations to the cloud, relying on systems like Amazon Web Services (AWS), which confirmed disruptions just this year.

Those AWS disruptions prompted debate about the concentration of online services on infrastructure owned by a few massive companies and while there is a risk, it’s tiny.

Amazon and Microsoft cloud services are highly reliable. To say their services are available 99.99% of the time would be a grossly unfair; our very basic research suggests it’s closer to 99.9999% (known as ‘four nines’), equating to four minutes and 23 seconds of unavailability per month.

It’s no wonder we take their cloud services for granted. But that doesn’t mean they never break, and when they do, it can be damaging for your business reputation and finances.

What was the impact of the CrowdStrike global outage?

When a defective cybersecurity update from CrowdStrike caused a global outage, itbrought down 8.5 million Microsoft Windows devices.

The impact was felt around the world, by all sorts of businesses and organisations. Critically, thousands of flights were grounded, causing chaos for air cargo, while shipping container ports like Felixstowe, which handles 42% of all the UK’s container trade, couldn’t operate.

Why are supply chains vulnerable?

In the age of cloud computing, supply chains are no longer physical; they are digital, layered and highly interconnected, typically including:

While this architecture enables innovation and speed, it also means any failure can have wide-reaching consequences, because each layer depends on others to function seamlessly.

What are the supply chain risks  

If your business relies on the cloud, the biggest risks to your supply chain are:

  • Concentration of cloud providers: With lots of organisations relying on a small number of major cloud providers a disruption within a single provider can affect thousands of businesses simultaneously. The risk is often underestimated, particularly where organisations have single-provider dependencies
  • Third-party service dependencies: Cloud environments frequently rely on external services, like payment processors, messaging tools, and security layers. CrowdStrike is a good example of what happens when integrated systems rely on an update from a third-party provider.
  • Cyber supply chain risk: Cloud computing is a key target for cybercriminals who can gain broader access by exploiting the vulnerabilities of suppliers instead of attacking an organisation directly. For cloud-reliant businesses, it can cause operational damage and potential liability to clients and stakeholders.

The interconnected nature of cloud environments means a small failure can escalate rapidly, affecting entire systems

How to protect your supply chain

Fortunately, you can manage the supply chain risks by:

  • Making risks visible and having a clear understanding of all critical dependences, including indirect suppliers.
  • Assessing all the components in your supply chain for things like security features, operational resilience and compliance standards
  • Using multi-cloud strategies and redundancy mechanisms, like AWS’s Multi-AZ (multi availability zones) which diverts capacity to alternative global servers when one is disconnected, or segmentation of critical services.
  • Ensuring agreements clearly define responsibilities, service levels and liability, and mirror the contractual indemnity of your suppliers, so that you aren’t promising 100% availability when your suppliers are offering 99%.

How insurance can protect your business

Robust risk management can help safeguard your business, but it won’t eliminate all exposures.

Make sure your insurance offers:

Taking a strategic approach

Supply chain risk in cloud computing isn’t just a technical issue, it’s a core business risk that needs to be approached strategically.

As your reliance on cloud infrastructure grows, so should your understanding and management of the dependencies. We can help you identify exposures and develop risk strategies. Speak to our friendly team of experts today.