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MALAYSIA – INSURANCE
GUIDANCE ON COMPLYING WITH REGULATORY REQUIREMENTS APPLICABLE TO FINANCIAL SERVICES INSTITUTIONS
USING CLOUD COMPUTING
Last updated: November 2014
1. WHAT DOES THIS MICROSOFT GUIDANCE CONTAIN?
This guidance document provides a guide to complying with the regulatory process and requirements applicable to financial services institutions using
cloud computing. In this guidance financial services institutions means insurance companies (“ICs”). Microsoft has prepared a guidance document for
other financial service institutions which is available on request.
Sections 2 to 6 of this guidance sets out some high level information about the applicable legal frameworks governing banks’ and insurance companies’
use of cloud computing services and the regulatory process that applies.
Section 7 sets out questions in relation to outsourcing to a cloud services solution based on the laws, regulations and guidance that are relevant to the
use of cloud services. Although there is no requirement to complete a checklist like this one, we have received feedback from ICs that a checklist
approach like this is very helpful. The checklist can be used:
(i) as a checklist for ensuring regulatory compliance with the requirements set out in the laws, regulations and guidelines (listed in Section 2); and
(ii) as a tool to aid discussions with the regulator(s) (listed in Section 3), should they wish to discuss your organization’s overall approach to
compliance with their requirements.
Appendix One also contains a list of key contractual requirements based on the laws, regulations and guidance that are relevant to an IC’s use of cloud
services.
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Note that this document is not intended as legal or regulatory advice and does not constitute any warranty or contractual commitment. Instead, it is
intended to streamline the regulatory process for you. You should seek independent legal advice on your technology outsourcing project and your legal
and regulatory obligations. Please note that the scope of this document specifically does not include potentially applicable state laws, rules and
regulations.
2. WHAT REGULATIONS AND GUIDANCE ARE RELEVANT?
BNM has developed several relevant documents which ICs should bear in mind. As with banks, there are effectively different “layers” of rules that apply
depending on whether the use of Office 365 constitutes an “outsourcing” and, if so, whether it is significant enough to constitute a “material outsourcing”.
Even if it does not constitute an “outsourcing” or “material outsourcing”, more other general technology guidelines apply, specifically: IT Guidelines, E-
Banking Guidelines, Business Continuity Management Guidelines and Guidelines on Data Management and Management Information System as listed
below.
The relevant documents are as follows (although most of them are not available on the BNM website but we have included a hyperlink where they are):
BNM’s Guidelines on Outsourcing for Insurers.
BNM’s Guidelines on Internet Insurance.
BNM’s Guidelines on Data Management and MIS Framework for Financial Institutions.
BNM’s Guidance on Business Continuity Management (“BNM’s BCM Guidelines”).
BNM’s Guidelines on Management of IT environment.
In addition, the Financial Services Act 2013 (“FSA”) contains some relevant provisions.
3. WHO IS/ARE THE RELEVANT REGULATOR(S)?
The Bank Negara Malaysia (“BNM”)
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4. IS REGULATORY APPROVAL REQUIRED IN MALAYSIA?
Yes.
The prior consent of BNM is only required if an IC wishes to undertake an outsourcing which is deemed to be “material” or which results in services being
provided in a location outside Malaysia whether material or not. It is prudent to assume that the use of Office 365 would, as a minimum, constitute an
“outsourcing”. Whether it would then constitute a “material outsourcing” would be determined on a case-by-case basis, based on an analysis of whether
the disruption of the Microsoft Cloud Services would have the potential to significantly impact the financial institution’s business operations, reputation or
profitability1. Depending on the solution you decide on, the service will likely involve data centers based outside of Malaysia.
5. IS/ARE THERE (A) SPECIFIC FORM OR QUESTIONNAIRE(S) TO BE COMPLETED?
No.
Unlike in certain jurisdictions, such as Singapore, there are no specific forms or questionnaires that an IC must complete when considering cloud
computing solutions.
6. DOES THE REGULATOR MANDATE SPECIFIC CONTRACTUAL REQUIREMENTS THAT MUST BE ADOPTED?
Yes.
BNM does specifically mandate contractual requirements that must be agreed by ICs with their service providers. These are not set out in one list in any
one place unfortunately but scattered across the different documents referred to above. Microsoft has included these points in the document which
follows in relation to the relevant issues and Appendix One contains a comprehensive list and details of where in the Microsoft contractual documents
these points are covered.
1 Relevant considerations in terms of what is constituted to be ‘material’ can be found in the BNM Guidelines on Outsourcing for Insurers, Part VIII.
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7. CHECKLIST
Key:
In blue text, Microsoft has included template responses that would demonstrate how your proposed use of Microsoft’s services would address the point
raised in the checklist. Some points are specific to your own internal operations and processes and you will need to complete these answers as well.
In red italics, Microsoft has provided guidance to assist you with the points in the checklist.
Ref. Question/requirement Template response and guidance
A. GENERAL
1. Who is the Service Provider? Please
provide company profile/background.
In case requested, details of the Microsoft corporate entity providing the services are provided below.
The Service Provider is Microsoft Operations Pte Ltd, the regional licensing entity for Microsoft Corporation,
a global provider of information technology devices and services, which is publicly-listed in the USA
(NASDAQ: MSFT). Microsoft’s full company profile is available here: https://www.microsoft.com/en-
us/news/inside_ms.aspx.
2. List all proposed activities and operations
to be outsourced to the Service Provider.
Confirm that the outsourcing will not
include ‘core activities’.
Paragraph 3.2 of the BNM’s Guidelines on Outsourcing for Insurers which provides that ICs should not
outsource core activities except in very limited circumstances. “Core activities” are defined in Part V of those
guidelines as activities constituting insurance business; board and senior management; internal audit and
compliance functions; risk management; strategic planning and decision making; and financial analysis.
We can confirm that the outsourced services will not involve any core activities or any inherent banking
functions such as services associated with placement of deposits and withdrawals.
The arrangement will involve the outsourcing of certain IT functions through the use of Microsoft’s “Office
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365” service, which is described in more detail here: Microsoft Office 365. Amongst other things, the Office
365 service includes:
Microsoft Office applications hosted in the “cloud”;
Hosted email;
Web conferencing, presence and instant messaging;
Data and application hosting;
Spam and malware protection; and
IT support services.
B. OUTSOURCING POLICY AND RISK MANAGEMENT
3. Is senior management confident that there
are effective oversight, review and
reporting arrangements in place to ensure
that service level agreements regarding
standards on data quality, integrity and
accessibility are observed at all times?
Paragraph 4.12 of the BNM’s Guidelines on Data Management and MIS Framework for Development
Financial Institutions (“DFI Guidelines”). You may want to add to the following any specific details of
communications with and involvement of senior management.
Yes.
It is essential to us is that, despite the outsourcing, we retain control over our own business operations,
including control of who can access data and how they can use it. At a contractual level, we have dealt with
this via our contract with Microsoft, which provides us with legal mechanisms to manage the relationship
including appropriate allocation of responsibilities, oversight and remedies and the relevant regulatory
requirements. At a practical level, we have selected the Office 365 product since it provides us with
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transparency in relation to data location, access/audit and authentication and advanced encryption controls.
We have access rights (at any time) to the online dashboards, which provide live information in relation to
Microsoft’s services’ performance against performance measures. Finally, we (not Microsoft) will continue
to own and retain all rights to our data and our data will not be used for any purpose other than to provide us
with the Office 365 services.
4. Does your organization have a written,
board-approved outsourcing risk
philosophy showing that management have
considered the overall business and
strategic objectives and assessed the
materiality of the outsourcing arrangements
and has approved the outsourcing?
Paragraphs 9.2, 9.4 and 9.5 of the BNM’s Guidelines on Outsourcing for Insurers which provide that the
board should approve a framework for assessing the materiality of all existing and prospective outsourcing
arrangements. It refers to this as an ‘outsourcing risk philosophy’.
Paragraph 26.1 of the BNM’s Guidelines on Internet Insurance. BNM expects that you will have sought
Board approval in relation to the outsourcing so you will need to confirm this here.
Yes/No
[See attached board approval.]
More details of our outsourcing risk philosophy and analysis are set out below.
5. Does the outsourcing risk philosophy and
your business case address the following?
(i) Identification of the activities
that will not be outsourced for
strategic or internal control
reasons.
Paragraphs 9.5 and 9.7 of the BNM’s Guidelines on Outsourcing for Insurers and paragraph 26.1 of the
BNM’s Guidelines on Internet Insurance. BNM expects you to be able to demonstrate that your outsourcing
risk philosophy and business case each of these points. Items (i) to (viii) are largely internal matters that you
will need to outline and show you have considered. Items (ix) and (x) directly relate to Microsoft’s offering so
you may find the following helpful:
(ix) Reporting and Monitoring.
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(ii) Expectations of the
outsourcing arrangements in
terms of contribution to your
overall strategic and business
objectives.
(iii) Limits on the acceptable
overall level of outsourced
activities.
(iv) The potential impact of the
outsourced activity to the
economic or commercial value
of the insurer.
(v) An assessment of whether an
independent enterprise in
comparable circumstances
would be likely to outsource
the activity.
(vi) Costs implication of the
outsourcing arrangement
(including costs associated
with internal resources
required to oversee and
manage the outsourcing
Yes.
Microsoft’s Service Level Agreement (“SLA”) applies to the Office 365 product. Our IT administrators also
have access to the Office 365 Service Health Dashboard, which provides real-time and continuous
monitoring of the Office 365 service. The Service Health Dashboard provides our IT administrators with
information about the current availability of each service or tool (and history of availability status) details
about service disruption or outage, scheduled maintenance times. The information is provided via an RSS
feed.
Amongst other things, it provides a contractual 99.9% uptime guarantee for the Office 365 product and
covers performance monitoring and reporting requirements which enable us to monitor Microsoft’s
performance on a continuous basis against service levels.
As part of the support we receive from Microsoft, we also have access to a technical account manager who
is responsible for understanding our challenges and providing expertise, accelerated support and strategic
advice tailored to our organization. This includes both continuous hands-on assistance and immediate
escalation of urgent issues to speed resolution and keep mission-critical systems functioning. We are
confident that such arrangements provide us with the appropriate mechanisms for managing performance
and problems.
We also have extensive audit rights as detailed in section E below.
(x) An assessment of your ability to retain control of the outsourced activity.
The handing over of certain day to day responsibility to an outsourcing provider does present some
challenges in relation to control. It is essential to us is that, despite the outsourcing, we retain control over
our own business operations. At a contractual level, we have dealt with this via our contract with Microsoft,
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arrangement) relative to
anticipated benefits.
(vii) The cumulative impact,
including risk concentrations,
of all outsourcing
arrangements on the overall
safety and soundness of your
business.
(viii) An assessment of key
outsourcing risks, including but
not limited to the impact of the
outsourcing arrangement on
the quality of your service.
(ix) Proper reporting and
monitoring of the integrity and
quality of work conducted by
the Service Provider.
(x) An assessment of your ability
to retain control of the
outsourced activity.
which provides us with legal mechanisms to manage the relationship including appropriate allocation of
responsibilities, oversight and remedies and the mandatory provisions required by BNM. At a practical level,
we have selected the Office 365 product since it provides us with transparency in relation to data location,
authentication and advanced encryption controls. We (not Microsoft) will continue to maintain control and
will own and retain all rights to our data and our data will not be used for any purpose other than to provide
us with the Office 365 services.
6. Does your organization have an
outsourcing risk management program and
Paragraphs 9.6 and 10.1 of the BNM’s Guidelines on Outsourcing for Insurers which provides that insurers
are expected to have in place a comprehensive ‘risk management program’ that is applied to all material
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policies that apply to material outsourcing
arrangements?
outsourcing arrangements and that all decisions to outsource a material activity should be supported by a
sound business case. The business case should take into account the potential benefits of outsourcing
against risks that may arise, having regard to all relevant prudential matters as well as short-term and long-
term implications.
There would appear to be some overlap between the risk management program and the outsourcing risk
philosophy. You will need to be able to confirm that you have one and provide details. Specific areas that
should be covered are set out below.
7. Does your risk management program
explicitly cover the management of country
risks including the following areas:
(i) Strategic risks (activities carried on
by the Service Provider on its own
behalf that are inconsistent with the
overall strategic goals of the
insurer; failure to implement
appropriate oversight of the
Service Provider; inadequate
expertise to oversee the Service
Provider);
(ii) Reputational risks (poor service by
the Service Provider; customer
interaction that is inconsistent with
IC’s standards; unethical practices
Paragraph 10.2 of the BNM’s Guidelines on Outsourcing for Insurers. Many of these areas will require detail
regarding internal policies but we have included some information in relation to Microsoft’s specific offerings
where relevant to assist where possible.
Yes.
Office 365 is hosted out of […..]. This/These location(s) has/have been vetted for
geopolitical/socioeconomic risks as set out in this checklist requirement. As part of our usual processes, we
constantly monitor the countries in which we operate.
(i) Strategic risks. We have no reason to believe that any activities carried out by the Service
Provider on its own behalf would be inconsistent with our overall strategic goals. To the
contrary, we have selected a Service Provider with a very strong track record and experience of
understanding the requirements of financial institutions. We are also very confident that the
contractual protections and nature of the service offering enable us to have appropriate
oversight of the Service Provider and tools which are very easy to use to ensure this oversight
as opposed to demanding the development of new skillsets and high levels of expertise in order
to manage it on our side. Microsoft will not have interactions with customers. The strategic risks
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of the Service Provider);
(iii) Compliance risks (prudential and
market conduct regulations not
complied with; breach of obligation
to preserve customer data
confidentiality; changes in
regulations not communicated to
the service provider in a timely
manner);
(iv) Operational risks (technology
failure, inadequate financial
capacity of Service Provider to
fulfill obligations or provide
remedies/restitution; fraud or error;
failure of IC to undertake
inspections of Service Provider);
(v) Exit strategy risks (over reliance on
one firm to provide service; loss of
relevant skills or resources in the
IC preventing it from bringing an
outsourced activity back in-house;
contracts which make a speedy
exit prohibitively expensive);
in our view are therefore low.
(ii) Reputational risks. Again, we see the risks as very low since we have undertaken a very
thorough due diligence process and chosen a world-class and highly experienced Service
Provider who is able to provide contractually backed up assurances of quality of service. We
also have numerous protections in the contract itself in order to monitor the service performance
and take action in the event that any issues arise.
(iii) Compliance risks. We are not outsourcing core business activities. In that respect the risks of
market conduct regulations not being complied with purely as a result of these outsourced
services are very low. As detailed in section F, there are very strong security arrangements and
safeguards in place to prevent any damage to customer data confidentiality.
(iv) Operational risks. The service provides high SLA (as defined above) commitments but also
ensures that a raft of different safeguards and arrangements are in place to prevent and
minimize the impact of any technology failure. Microsoft is subject to very high international
auditing standards in this regard which provide us with a great deal of comfort. The size and
resources that Microsoft has in place also mean that we do not foresee risks in relation to the
adequacy of Microsoft to fulfill obligations or provide remedies and restitution. The nature of the
services that are being outsourced also mean that there are low risks of fraud or error. In
relation to risks in respect of our failure to undertake inspections (for practical or cost
considerations) we have assurance in the fact that Microsoft is also subject to its own regular
reviews as well as independent auditing by a third party – the reports of which are made
available to us.
(v) Exit strategy risks. Our contract with Microsoft provides various opportunities to terminate the
service even at short notice as well as contractual obligations on the part of Microsoft to enable
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(vi) Counter party risks (inappropriate
credit assessments leading to
diminished quality of receivables);
(vii) Country risks (political, social and
legal climates may create added
risk and business continuity
planning can be more complex);
(viii) Contractual risks (inability to
enforce the contract);
(ix) Information risks (reliance on
information by Service Provider
that may be materially inaccurate;
delay in providing timely data and
information to IC or regulator;
confidentiality of commercially
sensitive/customer information may
be compromised);
(x) Concentration risks (reliance on
one Service Provider for multiple
activities);
(xi) Due diligence of the Service
Provider;
the transfer of services to another service provider or back in-house. These are not services
which would commonly be provided by any IC in-house in any event however.
(vi) Counter party risks. We do not see any risks in relation to inappropriate credit assessments
given the nature of the services being outsourced.
(vii) Country risks Office 365 offers data-location transparency so that the organizations and
regulators are informed of the jurisdiction(s) in which data is hosted. The centers are
strategically located around the world taking into account country and socioeconomic factors.
We are confident that Microsoft’s data center locations offer extremely stable socioeconomic
environments. Microsoft data center locations are made public on the Microsoft Trust Center.
Contractual risks. We are not concerned regarding any inability to enforce the contract. The
contract contains various remedies including service credits and also the ability for us to
terminate the services quickly and easily.
(viii) Information risks. We do not foresee risks connected with inaccurate information provided by
the Service Provider given the nature of the services that are being provided. Further, in
relation to any information that is provided to us by Microsoft, we have assurances in the fact
that they are subject to independent audit and international standards and also that BNM has
audit rights. Microsoft’s service ensures the provision of real-time information via their
dashboard and various protections detailed elsewhere in this document to ensure the protection
of commercially sensitive and customer information.
(ix) Concentration risks. We are not placing undue reliance on one service provider for multiple
activities in making this outsourcing. The arrangement is for the provision of certain IT services
only and not of the nature that would usually be split between different service providers.
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(xii) Service Agreements;
(xiii) Contingency Plans; and
(xiv) Monitoring and control.
(x) Due diligence of the Service Provider. See section C below.
(xi) Service Agreements. See section D below.
(xii) Contingency plans. See section G below.
(xiii) Monitoring and control of outsourcing. See section B5 above.
C. SERVICE PROVIDER SELECTION CRITERIA & DUE DILIGENCE
8. Is the selection process of the Service
Provider and its sub-contractors, if any,
formally defined and documented?
Paragraph 10.4 of the BNM’s Guidelines on Outsourcing for Insurers which provides that appropriate due
diligence is expected to be conducted by insurers prior to the selection of service providers. Paragraph
15(a), Part II of the BNM’s Guidelines on Management of IT Environment states that due diligence should be
adequately carried out to review and assess outsourcing viabilities, capabilities, reliabilities, expertise and
track records before being approved by the board of directors.
Yes.
The selection process was formally defined and documented. It covered the service provider’s:
financial soundness;
reputation;
managerial skills
technical capabilities; and
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operational capability and capacity in relation to the services to be performed.
[Please see the attached documentation for further information.]
9. Did your selection criteria consider the
following? Are there any other objective
criteria that you considered?
(a) Capabilities, expertise, track
records, experience, technical
competence and adequacy of
human resource capabilities of the
Service Provider to perform the
specified activity to be outsourced.
(b) Service Provider’s understanding
of your organization’s strategic and
business objectives in relation to
the specific activity outsourced.
(c) Financial strength and resources of
the Service Provider (based on
recent audited financial statements
and other relevant information),
including the consideration of the
extent of the Service Provider’s
liabilities and financial ability (i.e.,
This is covered in several places: paragraph 10.5 of the BNM’s Guidelines on Outsourcing for Insurers;
paragraphs 10.4 and 15(a); Part II of the BNM’s Guidelines on Management of IT Environment; paragraph
1(d), Part IV of the BNM’s Guidelines on Management of IT Environment; paragraph 1(d), Part IV of the
BNM’s Guidelines on Management of IT Environment; and paragraph 15(b), Part II of the BNM’s Guidelines
on Management of IT Environment.
Yes.
We followed a rigorous review and selection process. Set out below are the specific areas we considered
and why we decided on Microsoft:
a. Capabilities, experience and track record. Microsoft is an industry leader in cloud computing. Office
365 was built based on ISO/IEC 27001 standards and was the first major business productivity public
cloud service to have implemented the rigorous set of global standards covering physical, logical,
process and management controls. 40% of the world’s top brands use Office 365. We consulted various
case studies relating to Office 365, which are available on the Microsoft website and also considered the
fact that Microsoft has amongst its customers some of the world’s largest organizations and financial
institutions.
b. Service Provider’s understanding of our objectives. We have conducted detailed discussions with
Microsoft and are confident that they understand our business and objectives. As set out above and
below, their extensive experience and reputation in helping other financial institutions also helps us to
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professional indemnity insurance
coverage) to compensate your
organization for errors, negligence
and other operational failures.
(d) Business reputation, complaints,
regulatory infringements and
pending or potential litigation of the
Service Provider.
(e) Compatibility with your organization
in terms of business objectives,
human resource policies, service
philosophies and business culture.
(f) Security and internal controls,
standards, policies and
procedures.
(g) Business resumption and
contingency plans including
disaster recovery capabilities.
(h) Ability of the Service Provider to
comply with the relevant regulatory
requirements applicable to your
organization (factors that could be
be confident in this decision.
c. Financial strength and resources. Microsoft Corporation is publicly-listed in the United States and is
amongst the world’s largest companies by market capitalization. Microsoft’s audited financial statements
indicate that it has been profitable for each of the past three years. Its market capitalization is in the
region of USD 280 billion. Accordingly, we have no concerns regarding its financial strength and ability
to compensate us for failures.
d. Business reputation, complaints, regulatory infringements. As set out above, Microsoft has a very
strong international reputation and experience. There are no complaints or regulatory infringements. In
fact, the European Union’s data protection authorities have found that Microsoft’s enterprise cloud
contracts meet the high standards of EU privacy law. Microsoft is the first – and so far the only –
company to receive this approval.
e. Compatibility with our organization. We have conducted detailed discussions with Microsoft and are
confident that they understand our business and that we will be able to work well with them.
f. Security and internal controls. Microsoft is an industry leader in cloud security and implements
policies and controls on par with or better than on-premises data centers of even the most sophisticated
organizations. We have confidence in the security of the solution and the systems and controls offered
by Microsoft. In addition to the ISO/IEC 27001 certification, Office 365 is designed for security with
BitLocker Advanced Encryption Standard (“AES”) encryption of email at rest and security sockets layer
(“SSL”)/transport layer security (“TLS”) encryption of data in transit. The Microsoft service is subject to
the SSAE16 SOC1 Type II audit, an independent, third party audit. In particular, all personnel with
access to customer data are subject to background screening, security training and access approvals.
In addition, the access levels are reviewed on a periodic basis to ensure that only users who have
appropriate business justification have access to the systems. User access to data is also limited by
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considered include the Service
Provider’s experience in regulated
financial service industries).
(i) Reliance on and previous
experience in dealing with sub-
contractors.
user role. For example, system administrators are not provided with database administrative access.
Microsoft offers contractually-guaranteed 99.9% uptime, hosted out of world class data centers with
physical redundancy at disk, NIC, power supply and server levels, constant content replication, robust
backup, restoration and failover capabilities, real-time issue detection and automated response such
that workloads can be moved off any failing infrastructure components with no perceptible impact on the
service, with 24/7 on-call engineering teams.
g. Business resumption and contingency plans. Microsoft offers contractually-guaranteed 99.9%
uptime, hosted out of world class data centers with physical redundancy at disk, NIC, power supply and
server levels, constant content replication, robust backup, restoration and failover capabilities, real-time
issue detection and automated response such that workloads can be moved off any failing infrastructure
components with no perceptible impact on the service, with 24/7 on-call engineering teams. More details
regarding business resumption and contingency plans are set out in section G below.
h. Specific financial services credentials and our business. Financial Institution customers in leading
markets, including in the UK, France, Germany, Australia, Singapore, Canada, the United States and
many other countries have performed their due diligence and, working with their regulators, are satisfied
that Office 365 meets their respective regulatory requirements. This gives us confidence that Microsoft
is able to help meet the high burden of financial services regulation and is experienced in meeting these
requirements. We have had detailed discussions with Microsoft regarding our business objectives and
are confident that they understand them.
i. Reliance on and previous experience in dealing with sub-contractors. Microsoft does use sub-
contractors to provide certain ancillary assistance, but not for any critical roles. An up-to-date list of all
subcontractors used to provide the ancillary services (including exact services) is available at
http://trustoffice365.com. Microsoft ensures that all sub-contractors that it deals with are subject to
stringent requirements and Microsoft is experienced at managing such relationships. If we do not
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approve of a subcontractor that is added to the list, then we are entitled to terminate the affected online
services.
10. Do you have processes in place to ensure
ongoing periodic due diligence?
Paragraph 10.6 of the BNM’s Guidelines on Outsourcing for Insurers which states that due diligence
processes should continue to be conducted periodically after the initial selection of a service provider,
having regard to the level of materiality of the outsourcing arrangement and risks associated with the use of
a particular service provider, as well as the experience with the quality of the service performed. Generally,
due diligence should be carried out whenever there are significant changes in the circumstances of the
service provider (e.g. changes in key personnel, work procedures or systems of the service provider) which
materially affect the factors used as the basis for selection.
Suggested wording below. You will likely want to add to this in order to provide details of any internal
processes you have.
Yes.
We have various monitoring tools in relation to the service that enable us to carry out continuous due
diligence in relation to the service and Service Provider. We may trigger specific reviews where there are
significant changes in the circumstances of the Service Provider and services.
In our contract with Microsoft, under the FSA, Microsoft offers us the right to participate in the Microsoft
Online Services Customer Compliance Program. Under this Compliance Program, we are offered the
following key features: access to the controls that apply to each online service and the effectiveness of
those controls; access to data related to service operations; receipt of notifications of changes that may
materially impact Microsoft’s ability to provide the online services; engagement with Microsoft’s subject
matter experts and external auditors; and the ability to provide suggestions to improve the online services.
Under the FSA we are also provided with access to Microsoft’s independent third party audit reports and we
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have the right to review Microsoft’s Information Security Policies, along with other information we may
reasonably request regarding Microsoft’s security practices and policies. Finally, our regulator is also
provided with a contractual right under the FSA to examine Microsoft’s online services. We are confident
that such arrangements provide us with the appropriate level of assessment of Microsoft’s ability to meet our
policy, procedural, security control and regulatory requirements.
D. SERVICE AGREEMENT
See also Appendix One to this document which includes a comprehensive list of the different provisions in the various regulations in Malaysia which
require ICs to insert specific contractual provisions into their agreements with outsourcing vendors. The appendix then maps these against the
clauses of Microsoft’s agreement where these are covered.
11. Has a service agreement (“SA”) for each
of the items, activities, operations,
transactions or areas to be outsourced to
the Service Provider been established?
Paragraph 10.9 of the BNM’s Guidelines on Outsourcing for Insurers.
Yes.
The written contract we have with Microsoft is in the form of an SLA which is available at:
http://www.microsoftvolumelicensing.com/DocumentSearch.aspx?Mode=3&DocumentTypeId=37
12. Has the SA been reviewed by legal
counsel?
Paragraph 10.9 of the BNM’s Guidelines on Outsourcing for Insurers.
Microsoft recommends that you do seek legal advice on the use of cloud computing services in relation to
statutory/regulatory/common law requirements. You will need to be able to confirm this review has been
undertaken.
Yes.
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13. Does the SA cover the following?
(a) Nature and scope of the service
provided (i.e., scope of the
relationship, frequency, content,
agreed roles, responsibilities and
duties of Service Provider and
location of service to be provided)
(b) Performance monitoring (i.e.,
includes service levels and
performance measures; liability of
the service provider for
unsatisfactory performance or
other breach of agreement of the
outsourced functions)
(c) Clear identification of ownership
and access (i.e., ownership of
assets generated, purchased or
acquired during the outsourcing
arrangements and your access to
those assets)
(d) Protection of confidentiality and
security of your organization and
your clients’ information (i.e. roles
Paragraphs 10.6 and 10.10 of the BNM Guidelines on Outsourcing for Insurers provides for the provisions
that should be incorporated into the service agreements, depending on the materiality of the outsourced
activity. Specific obligations can also be found in different places including: (i) paragraph 1(c), Part V of the
BNM’s Guidelines on Management of IT Environment; (iii) paragraph 110 of the BNM’s BCM Guidelines;
and (viii) paragraph 111 of the BNM’s BCM Guidelines.
Yes.
Taking each of the points in turn:
(a) Nature and scope of services: The contract includes this. See section 2 for an overview of the
services which are being provided.
(b) Performance monitoring: We have a detailed SLA with Microsoft. Microsoft provides a contractual
financially-backed 99.9% uptime guarantee for the Office 365 product and covers performance
monitoring and reporting requirements which enable us to monitor Microsoft’s performance on a
continuous basis against service levels. Under the service credits mechanism in the SLA, we may
be entitled to a service credit of up to 100% of the service charges. If a failure by Microsoft also
constitutes a breach of contract to which the service credits regime does not apply, we would of
course have ordinary contractual claims available to us too under the contract.
(c) Ownership and access: We retain ownership of data at all times. There are no specific hardware
or other assets that are purchased on our behalf by Microsoft as part of these services to which we
would expect or need to have ownership or access.
(d) Protection of confidentiality and security: Microsoft as an outsourcing partner is an industry
leader in cloud security and implements policies and controls on par with or better than on-premises
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and responsibility, liability for
losses in the event of breach of
security/confidentiality; and
requirement for immediate
notification if there is a breach)
(e) Basis for compensation and fees
and circumstances under which
additional charges may be
imposed.
(f) Business resumption and
contingency arrangements
(g) Reporting requirements (i.e., type,
content and frequency of reporting;
whether the performance is met;
and reporting of incidents or events
that may affect the service; testing
and review of work done by the
Service Provider; progress of work
conducted)
(h) Dispute resolution (including
jurisdiction under which disputes
will be resolved).
data centers of even the most sophisticated organizations. Office 365 was built based on ISO/IEC
27001 standards, a rigorous set of global standards covering physical, logical, process and
management controls. This makes us confident that there are very robust security controls in place
to protect the transmission and storage of information/data within Microsoft’s infrastructure. The
following security features are also relevant to protecting the transmission and storage of
information/data within the Microsoft infrastructure:
1. The Microsoft Office 365 security features consist of three parts: (a) built-in security features; (b)
security controls; and (c) scalable security. These include 24-hour monitored physical hardware,
isolated customer data, automated operations and lock-box processes, secure networks and
encrypted data.
2. Microsoft implements the Microsoft Security Development Lifecycle (SDL) which is a comprehensive
security process that informs every stage of design, development and deployment of Microsoft
software and services, including Office 365. Through design requirements, analysis of attack
surface and threat modeling, the SDL helps Microsoft predict, identify and mitigate vulnerabilities
and threats from before a service is launched through its entire production lifecycle.
3. Networks within the Office 365 data centers are segmented to provide physical separation of critical
back-end servers and storage devices from the public-facing interfaces. Edge router security allows
the ability to detect intrusions and signs of vulnerability. Client connections to Office 365 use SSL
(as defined above) for securing Outlook, Outlook Web App, Exchange ActiveSync, POP3, and
IMAP. Customer access to services provided over the Internet originates from users’ Internet-
enabled locations and ends at a Microsoft data center. These connections are encrypted using
industry-standard TLS (as defined above)/SSL. The use of TLS/SSL establishes a highly secure
client-to-server connection to help provide data confidentiality and integrity between the desktop and
the data center. Customers can configure TLS between Office 365 and external servers for both
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(i) Default termination.
(j) Sub-contracting.
(k) Service Provider is subject to all
applicable regulations and
guidelines including BNM’s BCM
Guidelines.
(l) Requirements for ensuring the
continuity of the outsourced
business function in the event of a
major disruption affecting the
Service Provider’s services
(including recovery time objectives
(“RTO”) and provisions for legal
liability if the RTO is not achieved).
(m) Audit rights.
(n) Prompt notification by the Service
Provider of any breach of
confidentiality and liability for
losses that might result from such
breach.
inbound and outbound email. This feature is enabled by default. Microsoft also implements traffic
throttling to prevent denial-of-service attacks.
4. From a people and process standpoint, preventing breach involves auditing all
operator/administrator access and actions, zero standing permission for administrators in the
service, “Just-In-Time (JIT) access and elevation” (that is, elevation is granted on an as-needed and
only-at-the-time-of-need basis) of engineer privileges to troubleshoot the service, and segregation of
the employee email environment from the production access environment. Employees who have not
passed background checks are automatically rejected from high privilege access, and checking
employee backgrounds is a highly scrutinized, manual-approval process. Data is also encrypted.
Further details are included in section F below.
(e) Basis for compensation and fees. This is clearly set out in our contracts with Microsoft.
(f) Business resumption and contingency arrangements: There are detailed business contingency
provisions. See section G below for more details.
(g) Reporting requirements: Our IT administrators have access to the Office 365 Service Health
Dashboard, which provides real-time and continuous monitoring of the Office 365 service. The
Service Health Dashboard provides our IT administrators with information about the current
availability of each service or tool (and history of availability status) details about service disruption
or outage, scheduled maintenance times. The information is provided via an RSS feed. Amongst
other things, it provides a contractual 99.9% uptime guarantee for the Office 365 product and covers
performance monitoring and reporting requirements which enable us to monitor Microsoft’s
performance on a continuous basis against service levels. As part of the support we receive from
Microsoft, we also have access to a technical account manager who is responsible for
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understanding our challenges and providing expertise, accelerated support and strategic advice
tailored to our organization. This includes both continuous hands-on assistance and immediate
escalation of urgent issues to speed resolution and keep mission-critical systems functioning. We
are confident that such arrangements provide us with the appropriate mechanisms for managing
performance and problems.
(h) Dispute resolution. Our contract is subject to Washington state law and jurisdiction. We have
sought advice on this and are comfortable with this position. The contract also includes dispute
escalation procedures.
(i) Default termination: The Microsoft Business and Services Agreement (“MBSA”) contains usual
termination provisions. The SLA is contained with the MBSA is terminable by us for convenience at
any time by providing not less than 60 days’ notice. Any sub-agreements to the MBSA are
terminable by us for convenience at any time by providing not less than 30 days’ notice. In addition,
we have standard rights of termination for material breach. This gives us the flexibility and control
we need to manage the relationship with Microsoft because it means that we can terminate the
arrangements whether with or without cause.
(j) Sub-contracting. As set out above, Microsoft does use sub-contractors to provide certain ancillary
assistance, but not for any critical path roles. An up-to-date list of all subcontractors used to provide
the ancillary services (including exact services) is available at http://trustoffice365.com. Microsoft
ensures that all sub-contractors that it deals with are subject to stringent requirements and is
experienced at managing such relationships.
(k) Regulations and guidelines on Business Continuity: As set out in section F below, we have
ensured that Microsoft is required to provide robust and comprehensive business continuity
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management and processes.
(l) Continuity in the event of disruption: As set out in section F below, we have ensured that
Microsoft is required to provide robust and comprehensive disaster recovery management and
processes. Microsoft provides a contractual financially-backed 99.9% uptime guarantee for the
Office 365 product and covers performance monitoring and reporting requirements which enable us
to monitor Microsoft’s performance on a continuous basis against service levels. Under the service
credits mechanism in the SLA, we may be entitled to a service credit of up to 100% of the service
charges. If a failure by Microsoft also constitutes a breach of contract to which the service credits
regime does not apply, we would of course have ordinary contractual claims available to us too
under the contract.
(m) Audit rights. The extensive audit rights that Microsoft offers was a key reason for our decision to
choose Microsoft. Details of the different audit rights are set out in section E below.
(n) Notification of breach. Microsoft implements “prevent, detect, and mitigate breach”, which is a
defensive strategy aimed at predicting and preventing any security breach before it happens. This
involves continuous improvements to built-in security features, including port scanning and
remediation, perimeter vulnerability scanning, OS patching to the latest updated security software,
network-level DDOS (distributed denial-of-service) detection and prevention, and multi-factor
authentication for service access. Wherever possible, human intervention is replaced by an
automated, tool-based process, including routine functions such as deployment, debugging,
diagnostic collection, and restarting services. Office 365 continues to invest in systems automation
that helps identify abnormal and suspicious behavior and respond quickly to mitigate security risk.
Microsoft is continuously developing a highly effective system of automated patch deployment that
generates and deploys solutions to problems identified by the monitoring systems—all without
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human intervention. This greatly enhances the security and agility of the service.
In the event that a security incident or violation is detected, Microsoft Customer Service and Support
notifies Office 365 subscribers by updating the Service Health Dashboard that is available on the
Office 365 portal. We would have access to Microsoft’s dedicated support staff, who have a deep
knowledge of the service. Microsoft provides a RTO (as defined above) of 1 hour or less for
Microsoft Exchange Online and 6 hours of less for SharePoint Online, and a Recovery Point
Objective (“RPO”) of 45 minutes or less for Microsoft Exchange Online and 2 hours or less for
SharePoint Online.
Finally, after the incident, Microsoft provides a thorough post-incident review report (“PIR”). The
PIR includes: (i) an incident summary and event timeline; (ii) broad customer impact and root cause
analysis; (iii) actions being taken for continuous improvement. Microsoft will provide the PIR within
five business days following resolution of the service incident. Administrators can also request a PIR
using a standard online service request submission through the Office 365 portal or a phone call to
Microsoft Customer Service and Support.
E. AUDIT
14. Has your organization made explicit
provisions in the outsourcing contracts or
obtained letters of undertaking from
Service Providers to enable regulatory
bodies and appointed personnel such as
external and internal auditors to carry out
inspection or examination of the Service
Provider’s books, internal controls,
There are various provisions under Malaysia law that require this. In particular see: (i) Section 148(1)(b) of
the FSA; (ii) paragraphs 10.10 and 12.1 of the BNM’s Guidelines on Outsourcing for Insurers provides that
insurers shall, in all cases, obtain an undertaking from their outsourcing service providers (or sub-
contractors as applicable), or include a provision within the SA, giving authorized examiners of BNM the
right to: (a) examine the books, records, information, systems and the internal control environment in the
service provider (or sub-contractor as applicable), to the extent that they relate to the service being
performed for the insurer; and (b) access any internal audit or external audit findings of the service provider
(or sub-contractor as applicable) that concern the service being performed for the insurer; (iii) paragraph
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facilities, systems, processes and data
relating to the services provided to your
organization?
15(c), Part II of the BNM’s Guidelines on Management of IT Environment; (iv) paragraph 113 of the BNM’s
BCM Guidelines; and (v) paragraph 1(c), Part V of the BNM’s Guidelines on Management of IT
Environment.
Yes.
We are confident that in our choice of Microsoft as Service Provider we have far more extensive audit rights
than most if not all other Service Provider’s offer. This was an important factor in our decision to choose this
Service Provider.
In particular, the following audit protections are made available by Microsoft:
1. As part of Microsoft’s certification requirements, they are required to undergo regular independent
third party auditing (via the SSAE16 SOC1 Type II audit, a globally-recognized standard), and
Microsoft shares with us the independent third party audit reports. Microsoft also agrees as part of
the compliance program to customer right to monitor and supervise. We are confident that such
arrangements provide us with the appropriate level of assessment of Microsoft’s ability to meet our
policy, procedural, security control and regulatory requirements.
2. BNM is given a contractual right of audit/inspection over Microsoft’s facilities, so that it can assess
and examine systems, processes and security and regulatory compliance.
Microsoft also offers a Compliance Framework Program. If you take-up the Compliance Framework
Program, you may add this additional information about its key features: the regulator audit/inspection right,
access to Microsoft’s security policy, the right to participate at events to discuss Microsoft’s compliance
program, the right to receive audit reports and updates on significant events, including security incidents,
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risk-threat evaluations and significant changes to the business resumption and contingency plans.
F. CONFIDENTIALITY AND SECURITY
14. Have you obtained from the Service
Provider a written undertaking to protect
and maintain the confidentiality of your
customer data in compliance with the
secrecy provision pursuant to section 133
of the FSA and the protection of your own
confidential information?
Section 133(1) of the FSA which provides that no person who has access to any document or information
relating to the affairs or account of any customer of a financial institution, including: (a) the financial
institution; or (b) any person who is or has been a director, officer or agent of the financial institution, shall
disclose to another person any document or information relating to the affairs or account of any customer of
the financial institution.
Paragraph 26.1 of the BNM’s Guidelines on Internet Insurance which provides that any outsourcing of
information technology services that relates to internet insurance require that the service provider or
software vendor to provide the insurer with a written undertaking on its compliance with secrecy of
customers’ and the insurer’s information.
Yes.
Our contract with Microsoft contains robust confidentiality provisions to prevent disclosure of confidential
information whether of our customers or of our own. Information will only be provided to Microsoft’s sub-
contractors on a need to know basis for the purposes of providing the services and subject to similar
restrictions on confidentiality. If anything further is required we would work with Microsoft to provide
whatever further clarity the regulator may require in this regard.
It is also relevant to note that the European Union’s data protection authorities have found that Microsoft’s
enterprise cloud contracts meet the high standards of EU privacy law. Microsoft is the first – and so far the
only – company to receive this approval.
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15. Has senior management determined that
there are adequate controls for identifying,
reporting and responding to suspected
security incidents and violations?
Paragraph 6(b), Part II of the BNM’s Guidelines on Management of IT Environment. Paragraph 27,
Guidelines on Internet Insurance. This contains more specific requirements including that staff of the IC and
any outsourcing vendor are required to report all security breaches promptly to management. Material
security breaches, system downtime and degradation in system performance that critically affects the IC
should be reported to BNM: (i) an initial report to BNM via telephone immediately upon detection by
providing ‘initial information/observation’; and (ii) a formal report should be made within 2 days from the date
of detection. These reporting obligations have to be stated explicitly in the IC’s security policy and the IC
should also establish procedures for proper recording of occurrence of such incidents.
Yes.
Senior management is confident that there are adequate internal controls, prevention measures and
processes for early detection of errors, omissions and security incidents. Our extensive due diligence and
risk profiling at the outset and processes in place for monitoring, auditing and security protections assure us
of this. We have set out details of this elsewhere in this document.
Microsoft’s systems including its real-time monitoring facilities enable us to fulfill our reporting obligations to
BNM in the event of a security breach occurring.
16. Are the following security practices
implemented by the Service Provider?
(a) Firewalls have been installed on all
connection points between the
internal computer network and the
Internet.
There are specific security practice requirements contained in Part III of the BNM’s Guidelines on
Management of IT Environment (although note that these are considerations and not specific requirements
that are considered necessary in all circumstances) and in paragraph 21.5 of the BNM Guidelines on
Internet Insurance.
Yes.
This is an issue that we take very seriously. We have therefore checked these procedures in detail with
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(b) Intrusion detection-prevention
devices have been installed
(including denial-of-service security
appliances where appropriate).
(c) Virtual private networks (VPN)
have been developed within a
public switch network to protect all
transmissions from unauthorized
parties, while allowing the use of
the public network infrastructure.
(d) Public key infrastructure (PKI) is
used to perform authentication on
the internet through a combination
of digital certificates and public key
cryptography (PKC).
(e) Internationally accepted well-
defined industry standards of
payment protocol are used to
provide a secure environment for
online credit card payments.
(f) Penetration testing is conducted at
least once a year or whenever
substantial changes are made to
Microsoft and are confident that they provide excellent means to enable us to identify, report and respond
properly and promptly in the event of any security incident or violation. We are assured that Microsoft is
committed to protecting the privacy of our and Microsoft makes this statement in its Office 365 Privacy
Statement.
Taking each of the points in turn:
(a) Firewalls. Microsoft uses multiple layers of network devices in order to segregate network security
zones and block access to resources placed in high security zones from external parties.
(b) Intrusion detection-prevention devices. There are robust procedures offered by Microsoft that
enable the prevention of security incidents and violations in the first place. Specifically:
1. Microsoft implements 24 hour monitored physical hardware. Data center access is restricted 24
hours per day by job function so that only essential personnel have access to customer applications
and services. Physical access control uses multiple authentication and security processes, including
badges and smart cards, biometric scanners, on-premises security officers, continuous video
surveillance, and two-factor authentication.
2. Microsoft implements “prevent, detect, and mitigate breach”, which is a defensive strategy aimed at
predicting and preventing a security breach before it happens. This involves continuous
improvements to built-in security features, including port scanning and remediation, perimeter
vulnerability scanning, OS patching to the latest updated security software, network-level DDOS
(distributed denial-of-service) detection and prevention, and multi-factor authentication for service
access.
3. Wherever possible, human intervention is replaced by an automated, tool-based process, including
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the internet-related systems.
(g) Implement anti-virus software and
apply updates regularly.
(h) Access to security logs and audit
trails.
(i) Analysis of security logs for
suspicious traffic and intrusion
attempts.
(j) Conducting security awareness
education and programs.
(k) Providing separate physical/logical
environments for systems
development, testing and
production.
(l) Encrypting critical or sensitive
information which is stored or
transmitted over communication
networks.
routine functions such as deployment, debugging, diagnostic collection, and restarting services.
Office 365 continues to invest in systems automation that helps identify abnormal and suspicious
behavior and respond quickly to mitigate security risk. Microsoft is continuously developing a highly
effective system of automated patch deployment that generates and deploys solutions to problems
identified by the monitoring systems—all without human intervention. This greatly enhances the
security and agility of the service.
(c) VPNs. In multi-tenancy services Microsoft does not use VPN for customer to access Office 365
services. For a dedicated hosted offering, the customer may choose to use IP-VPN as a private
connection. Therefore, the response should be either: [Not applicable.] or [We will use an IP-VPN
as a private connection.]
(d) PKI. Office 365 provides us with the option to use PKI based user-authentication.
(e) Payment protocols. Not applicable to the services being outsourced by us.
(f) Penetration testing. Microsoft conducts penetration tests to enable continuous improvement of
incident response procedures. These internal tests help Office 365 security experts create a
methodical, repeatable, and optimized stepwise response process and automation.
(g) Anti-virus software. All services in Office 365 are virus-scanned every day with the latest virus
definitions.
(h) Access to security logs and audit trails. In the event that a security incident or violation is
detected, Microsoft Customer Service and Support notifies Office 365 subscribers by updating the
Service Health Dashboard that is available on the Office 365 portal. In addition, we have extensive
audit rights as described in Section E.
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(i) Analysis of security logs for suspicious traffic and intrusion attempts. Microsoft has robust
automated processes which are constantly monitoring in this regard. See response at (b) above for
more details.
(j) Conducting security awareness education and programs. All personnel with access to customer
data are subject to background screening, security training and access approvals. In addition, the
access levels are reviewed on a periodic basis to ensure that only users who have appropriate
business justification have access to the systems. User access to data is also limited by user role.
For example, system administrators are not provided with database administrative access. All
appropriate Microsoft Staff take part in a Microsoft Online Services sponsored security training
program, and are recipients of periodic security awareness updates when applicable. Security
education is an on-going process and is conducted regularly in order to minimize risks.
(k) Providing separate physical/logical environments for systems development, testing and
production. Microsoft has an operational change control procedure in place. The operational
change control procedure includes an assessment process of possible change impact change
testing in an approved non-production environment.
(l) Encrypting critical or sensitive information which is stored or transmitted over
communication networks: Networks within the Office 365 data centers are segmented to provide
physical separation of critical back-end servers and storage devices from the public-facing
interfaces. Edge router security allows the ability to detect intrusions and signs of vulnerability.
Client connections to Office 365 use SSL for securing Outlook, Outlook Web App, Exchange
ActiveSync, POP3, and IMAP. Customer access to services provided over the Internet originates
from users’ Internet-enabled locations and ends at a Microsoft data center. These connections are
encrypted using industry-standard TLS/SSL. The use of TLS/SSL establishes a highly secure client-
to-server connection to help provide data confidentiality and integrity between the desktop and the
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data center. Customers can configure TLS between Office 365 and external servers for both
inbound and outbound email. This feature is enabled by default. Microsoft also implements traffic
throttling to prevent denial-of-service attacks. Customer data in Office 365 exists in two states: (i) at
rest on storage media; and (ii) in transit from a data center over a network to a customer device.
All email content is encrypted on disk using BitLocker AES encryption. Protection covers all disks on
mailbox servers and includes mailbox database files, mailbox transaction log files, search content
index files, transport database files, transport transaction log files, and page file OS system disk
tracing/message tracking logs.
Office 365 also transports and stores secure/multipurpose Internet mail extensions (“S/MIME”)
messages. Office 365 will transport and store messages that are encrypted using client-side, third-
party encryption solutions such as Pretty Good Privacy (“PGP”).
17. How are customers authenticated? For
internal systems, how are staff in your
organization authenticated?
Paragraph 2(a), Part III of the BNM’s Guidelines on Management of IT Environment. You will need to
supplement this with details of your own internal authentication processes for internal systems.
Yes.
Office 365 uses two-factor authentication to enhance security. Typical authentication practices that require
only a password to access resources may not provide the appropriate level of protection for information that
is sensitive or vulnerable. Two-factor authentication is an authentication method that applies a stronger
means of identifying the user. The Microsoft phone-based two-factor authentication solution allows users to
receive their PINs sent as messages to their phones, and then they enter their PINs as a second password
to log on to their services.
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18. Is the Service Provider able to isolate and
clearly identify your customer data,
documents, records and assets to protect
their confidentiality?
Paragraph 6(b), Part II of the BNM’s Guidelines on Management of IT Environment and FSA as above.
Yes.
Microsoft’s transparency as to data location was a key consideration as part of the service provider selection
process. Active Directory isolates customers using security boundaries (also known as silos). This
safeguards a customer’s data so that the data cannot be accessed or compromised by co-tenants.
19. Are your data / applications stored in the
vendor systems commingled with those of
other subscribers? Is the Service Provider
able to isolate and clearly identify your
customer data, documents, records and
assets to protect their confidentiality?
Paragraph 10.10(c) of BNM’s Guidelines on Outsourcing for Insurers which states that the SA entered into
between the insurer and the service provider should provide for clear identification and establishment of
ownership of all assets relating to the outsourcing arrangement. The SA should specify the terms governing
the use of the insurer’s premises, personnel and equipment, where relevant.
Data and applications are not commingled with those of other customers and yes the Service Provider is
able to clearly identify our customer data, documents, records and assets to protect their confidentiality.
Networks within the Office 365 data centers are segmented to provide physical separation of critical back-
end servers and storage devices from the public-facing interfaces.
20. Are there documented system for
monitoring and managing the computer
center’s resources (i.e. utilization of the
central processing unit (CPU), hard disk
and memory, problem reporting and
prioritization, equipment malfunctions,
frequency and duration of system down
time and network activities to detect
Paragraph 3(g), Part V of the BNM’s Guidelines on Management of IT Environment.
Yes. The security procedures for safeguarding hardware, software and security are documented in detail by
Microsoft in its Standard Response to Request for Information – Security and Privacy. This confirms how the
following aspects of Microsoft’s operations safeguard hardware, software and data:
Compliance;
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suspicious trends and attempts to gain
access to the system)?
Data Governance;
Facility;
Human Resources;
Information Security;
Legal;
Operations;
Risk Management;
Release Management;
Resiliency; and
Security Architecture.
21. Are the following physical and
environmental controls available at the data
center?
(a) All computer and
telecommunications peripherals
adequately labeled for proper
identification
Part V of the BNM’s Guidelines on Management of IT Environment.
Taking each one in turn:
(a) All computer and telecommunications peripherals adequately labeled for proper
identification. Yes.
(b) Uninterruptible power supply (“UPS”). Microsoft’s data centers have dedicated 24x7 UPS and
emergency power support, i.e. generators. Regular maintenance and testing is conducted for both
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(b) Uninterruptible power supply
(c) Air conditioning system
(d) Temperature sensor
(e) Fire detector
(f) Smoke detector
(g) Fire suppression system
(h) Raised floor
(i) Water leakage detection system
the UPS and generators. Data centers have made arrangements for emergency fuel delivery. The
data centers have dedicated Facility Operations Centers to monitor the power systems, including all
critical electrical components – generators, transfer switch, main switchgear, power management
module and UPS equipment.
(c) Air conditioning system. Microsoft has implemented environmental controls to protect the data
centers including ventilation and air conditioning.
(d) Temperature sensor. Microsoft has implemented environmental controls to protect the data
centers including temperature control and heating. The data centers’ Facility Operations Centers
monitor the heating, ventilation and air conditioning system, which controls and monitors space
temperature and humidity within the data centers, space pressurization and outside air intake.
(e) Fire detector. Fire Detection and Suppression systems exist at all Microsoft’s data centers.
Additionally, portable fire extinguishers are available at various locations in the data center. Routine
maintenance is performed on facility and environmental protection equipment.
(f) Smoke detector. See above. In addition, Microsoft’s equipment is placed in environments which
have been engineered to be protective from environmental risks such as smoke.
(g) Fire suppression system. Fire Detection and Suppression systems exist at all Microsoft’s data
centers. Additionally, portable fire extinguishers are available at various locations in the data center.
Routine maintenance is performed on facility and environmental protection equipment.
(h) Raised floor. Microsoft’s equipment is placed in environments which have been engineered to be
protective from environmental risks such as water.
(i) Water leakage detection system. Microsoft has water leakage detection systems for water-cooling
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data centers.
22. Who is primarily in charge of security
administration and systems access
functions?
Paragraph 1(e), Part III of the BNM’s Guidelines on Management of IT Environment which provides that a
security administrator and/ or a system administrator who are responsible for the system security and/ or
administration functions and to implement policies as well as adopted standards, should be formally
appointed.
Overall responsibility for these matters remains with our organization and we have procedures in place to
monitor overall performance. Our [security administrator/system administrator is insert name].
Microsoft will perform the technical monitoring and management functions on our behalf. System level data
such as configuration data/file and commands are managed as part of the configuration management
system. Any changes or updates to or deletion of those data/files/commands will be automatically deleted
by the configuration management system as anomalies.
We will receive information about system integrity, security monitoring and network performance through the
Office 365 Service Health Dashboard, as described above.
23. Does the Service Provider adhere to the
provisions of the Personal Data Protection
Act 2010 (“PDPA”)?
Paragraph 26.1 of the BNM’s Guidelines on Internet Insurance which provides that any outsourcing of
information technology services that relates to internet insurance require that the vendor abide by any data
protection legislation that is in effect. The PDPA can be found here.
Yes.
Our use of Microsoft Office 365 would not cause us to fail to meet any obligation we may have under the
PDPA. In fact, we think that Microsoft Office 365 has features that will help us comply with certain provisions
(including security obligations). We will continue to maintain overall responsibility and accountability for
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compliance with the PDPA.
In relation to the specific requirements of the PDPA that apply to the use of cloud services:
1. We have an obligation to implement reasonable and appropriate organizational, physical and
technical measures to protect personal information. We are satisfied with Microsoft’s security
procedures, as described in its Standard Response to Request for Information – Security and
Privacy (and further described in other parts of this document).
2. We have an obligation to use contractual or other reasonable means to provide a comparable
level of protection while the information is being processed by Microsoft. We are satisfied that our
legally-binding agreement with Microsoft, and the operational procedures we have in place to
monitor compliance, together with our choice of service provider, will provide at least a comparable
level of protection for personal information. Our contract with Microsoft ensures that all data (but in
particular any customer data) is treated with the highest level of security enabling us to continue to
comply with our legal and regulatory obligations and our commitments to customers.
3. In addition Microsoft commits to comply with ISO/IEC 27018. In February 2015, Microsoft became
the first major cloud provider to adopt the world’s first international standard for cloud privacy,
ISO/IEC 27018. The standard was developed by the International Organization for Standardization
(ISO) to establish a uniform, international approach to protecting privacy for personal data stored in
the cloud. The British Standards Institute (BSI) has now independently verified that Microsoft is
aligned with the standard’s code of practice for the protection of Personally Identifiable Information
(PII) in the public cloud. The controls set out in ISO/IEC 27018 match the protections required by
the PDPA. For more information on this, follow this link.
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G. DATA BACKUP AND DISASTER RECOVERY
24. Does the Service Provider have a fully
documented and adequately resourced
business continuity plan (“BCP”) and
disaster recovery plan (“DRP”)? If yes,
provide documentation or details.
Paragraph 112 of the BNM’s BCM Guidelines.
Yes.
Microsoft offers contractually-guaranteed 99.9% uptime, globally available data centers for primary and
backup storage, physical redundancy at disk, NIC, power supply and server levels, constant content
replication, robust backup, restoration and failover capabilities, real-time issue detection and automated
response such that workloads can be moved off any failing infrastructure components with no perceptible
impact on the service, 24/7 on-call engineering teams.
Microsoft’s arrangements are as follows:
Redundancy
Physical redundancy at server, data center, and service levels;
Data redundancy with robust failover capabilities; and
Functional redundancy with offline functionality.
Resiliency
Active load balancing;
Automated failover with human backup; and
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Recovery testing across failure domains.
Distributed Services
Distributed component services like Exchange Online, SharePoint Online, and Lync Online limit
scope and impact of any failures in a component;
Directory data replicated across component services insulates one service from another in any
failure events; and
Simplified operations and deployment.
Monitoring
Internal monitoring built to drive automatic recovery;
Outside-in monitoring raises alerts about incidents; and
Extensive diagnostics provide logging, auditing, and granular tracing.
Simplification
Standardized hardware reduces issue isolation complexities;
Fully automated deployment models; and
Standard built-in management mechanism.
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Human backup
Automated recovery actions with 24/7 on-call support;
Team with diverse skills on the call provides rapid response and resolution; and
Continuous improvement by learning from the on-call teams.
Continuous learning
If an incident occurs, Microsoft does a thorough post-incident review every time; and
Microsoft’s post-incident review consists of analysis of what happened, Microsoft’s response, and
Microsoft’s plan to prevent it in the future.
For the avoidance of doubt, the nature of the services provided as part of Office 365 does not give rise to a
risk that the Bank itself could become “offline” (i.e. there would be no implication for core banking functions
such as transaction processing).
25. What are the data backup and recovery
arrangements for your organization’s data
that reside with the Service Provider?
Paragraph 71 of the BNM’s BCM Guidelines, which states that an institution should make available a
functional alternate and recovery site for their business functions and technology in the event the business
premises, key infrastructure and systems supporting critical business functions become unavailable.
Pursuant to paragraph 110 of the BNM’s BCM Guidelines, the institution should ensure that the service
provider is subjected to the BCM Guidelines, where appropriate. Therefore, the service provider should
ensure that it has a functional alternate and recovery site.
See response directly above for details.
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26. Has a testing of the BCP and DRP of the
Service Provider been conducted?
Paragraph 112 of the BNM’s BCM Guidelines which provides that the institution should ensure that periodic
testing is conducted by the outsourcing vendor on its BCP and DRP at least annually and twice a year,
respectively.
Yes.
As part of Microsoft’s certification requirements, it is required to undergo regular independent third party
auditing and Microsoft shares with us the independent third party audit reports.
27. How frequently does the Service Provider
conduct tests on its BCP and DRP?
Paragraph 112 of the BNM’s BCM Guidelines which provides that periodic testing should be conducted by
the outsourcing vendor at least twice a year on its BCP and DRP, respectively.
Microsoft carries out disaster recovery testing at least once per year.
28. Does your organization’s BCP address the
reasonably foreseeable situations in the
event that the Service Provider fails to
provide the required services, causing
disruptions to your organization’s
operations?
Paragraph 115 of BNM’s BCM Guidelines which provides that the institution’s own BCP should address
reasonably foreseeable situations where the outsourcing vendor fails to provide the required services,
causing disruptions to the institution’s operations.
Note, this question, primarily concerns your own internal BCP. If you have any questions or we can help in
any way, just let us know.
29. Have you tailored and tested your disaster
recovery or business continuity plan?
Part B.2.9 of the BNM’s BCM Guidelines which provides for the testing of the BCP and DRP by the
institution. BCP should be tested at least once a year for all critical business functions, while the DRP for all
critical application systems should be tested at least twice a year, of which one of the tests should be a “live
run”.
This question concerns your own testing as opposed to that which Microsoft carries out. You will need to be
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able to demonstrate that you comply with the requirements set out above in terms of frequency of testing.
30. Is the Service Provider required to notify
you in the event that it makes significant
changes to its BCP and DRP, or
encounters other circumstances that might
have a serious impact on its services?
Paragraph 114 of the BNM’s BCM Guidelines.
Yes.
Microsoft will inform us if there are any important changes to the service with respect to security, privacy,
and compliance. Microsoft will also promptly notify us if your data has been accessed improperly.
In the event that a security incident or violation is detected, Microsoft Customer Service and Support notifies
Office 365 subscribers by updating the Service Health Dashboard that is available on the Office 365 portal.
We would have access to Microsoft’s dedicated support staff, who have a deep knowledge of the service.
Microsoft provides a RTO (as defined above) of 1 hour or less for Microsoft Exchange Online and 6 hours of
less for SharePoint Online, and a Recovery Point Objective (“RPO”) of 45 minutes or less for Microsoft
Exchange Online and 2 hours or less for SharePoint Online.
After the incident, Microsoft provides a thorough PIR. See our response above for more information.
31. What are the RTO of systems or
applications outsourced to the Service
Provider?
Part G of the BNM’s BCM Guidelines, ‘Recovery Time Objective’.
RTO: 1 hour or less for Microsoft Exchange Online, 6 hours or less for SharePoint Online.
H. EXIT STRATEGY
32. Do you have the right to terminate the SA
in the event of default, ownership change,
change of security or serious deterioration
Paragraph 10.10(i) of BNM’s Guidelines on Outsourcing for Insurers which states that the SA between the
insurer and the service provider should provide for default events and remedies, which should include a
termination clause. In particular, the insurer should have the right to terminate the agreement if the agreed
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of service quality? service levels are consistently not met or when the service provider undergoes a material change in
ownership or encounters other circumstances that might seriously impair its ability to provide the agreed
services.
Yes.
Our main agreement with Microsoft contains usual termination provisions. The SLA is contained with the
MBSA is terminable by us for convenience at any time by providing not less than 60 days’ notice. Any sub-
agreements to the MBSA are terminable by us for convenience at any time by providing not less than 30
days’ notice. In addition, we have standard rights of termination for material breach. This gives us the
flexibility and control we need to manage the relationship with Microsoft because it means that we can
terminate the arrangements whether with or without cause.
33. In the event of contract termination with the
Service Provider, either on expiry or
prematurely, are you able to have all IT
information and assets promptly removed
or destroyed?
Paragraph 10.10(i) of the BNM’s Guidelines on Outsourcing for Insurers which states that the SA should
also lay down clear procedures for the return of the insurer’s intellectual or physical property in a timely
manner, in the event of default or termination.
Yes.
Microsoft uses best practice procedures and a wiping solution that is NIST 800-88 compliant. For hard
drives that can’t be wiped it uses a destruction process that destroys it (i.e. shredding) and renders the
recovery of information impossible (e.g., disintegrate, shred, pulverize, or incinerate). The appropriate
means of disposal is determined by the asset type. Records of the destruction are retained.
All Microsoft Online Services utilize approved media storage and disposal management services. Paper
documents are destroyed by approved means at the pre-determined end-of-life cycle.
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“Secure disposal or re-use of equipment and disposal of media” is covered under the ISO/IEC 27001
standards against which Microsoft is certified.
I. INFORMATION TO BE SUBMITTED FOR APPLICATIONS TO OUTSOURCE ABROAD
BNM’s prior approval is required for ICs to enter into any outsourcing arrangement (material or not) which results in services being provided in a
location outside Malaysia. Applications to outsource abroad should include the information set out below (see Appendix III of the BNM Guidelines on
Outsourcing for Insurers).
34. Full description of services to be
outsourced.
You can find the details in the contract which comprehensively sets out the scope of the arrangement and
the respective commitments of the parties. The online services are ordered under the Enrollment, and the
order will set out the online services and relevant prices.
The services are broadly described, along with the applicable usage rights, in the Product List and the PUR.
The services are described in detail in the Service Description, which is not part of the contract. However,
Microsoft makes a functionality commitment in the Core Features Amendment, and as a minimum the online
services will meet that commitment during the term of the contract.
35. Business case. You will need to provide a business case. You can draw upon some of the information contained in section
B above.
36. Materiality assessment. For ICs, see the relevant considerations regarding what is ‘material’ in Part VIII of the BNM Guidelines on
Outsourcing for Insurers.
37. Due diligence of Service Provider. You can draw upon the information provided in section C above.
38. Confirmation that the relevant laws of the You will likely want to undertake your own legal review in this regard. Microsoft is not aware of any laws in
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foreign jurisdiction and terms and
conditions of the SA allow for BNM to have
reasonable and timely access to
information/data belonging to the IC.
the countries in which it would be providing the services that would impact BNM having such access.
39. Description of the manner in which the IC
will ensure effective control and oversight
over the service outsourced (should include
a description of identified risks involved in
the arrangement and the strategies put in
place to address the risks).
You can draw upon the information contained in section B above which contains detailed information
regarding risk assessment and management and control and oversight.
40. Confirmation that the services are not
available locally at comparable costs and
service levels or, if available, the
justification for the use of the foreign
Service Provider.
You will need to confirm this point from your own analysis.
41. Description of any reciprocal services
provided out of Malaysia.
Not applicable.
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APPENDIX ONE
MANDATORY CONTRACTUAL REQUIREMENTS
This table sets out the specific items that must be covered in the IC’s agreement with the Service Provider.
Key:
Where relevant, a cross-reference is included in red italics to the underlying regulation that sets out the contractual requirement.
In blue text, Microsoft has provided you with a reference to where in the agreement the contractual requirement is covered for ease of reference.
Terms used below as follows:
OST = Online Services Terms
EA = Enterprise Agreement
Enrolment = Enterprise Enrolment
FSA = Financial Services Amendment
MBSA = Microsoft Business and Services Agreement
PUR = Product Use Rights
SLA = Online Services Service Level Agreement
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1. General obligations:
- All material outsourcings should be documented by clearly written
service agreements that address, as far as possible within the
contract, all issues relevant to managing the risks associated with
the outsourcing arrangement.
- The agreement should be reviewed by the IC’s legal counsel to
ensure that the IC’s interests are safeguarded.
- Agreements should be signed by the relevant parties prior to the
commencement of the services. Thereafter, material modifications to
the service agreement should not be permitted without the prior
consent of the IC.
Paragraph 10.9, BNM Guidelines on outsourcing for Insurers
Documented:
Yes.
The contractual documents are all written and clear.
Reviewed by legal counsel:
Yes.
Microsoft recommends that you do seek legal advice on the use of cloud
computing services in relation to statutory / regulatory / common law
requirements. You will need to be able to confirm this review has been
undertaken.
Signed by relevant parties prior to commencement of the services
and material modifications not permitted without the consent of the
IC:
Yes.
The document is signed by the parties. Section 11k of the MBSA states
that the contract may be amended only by a formal written agreement
signed by both parties.
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2. The description of the services to be provided including the frequency,
content and format of the services.
Paragraph 10.10(a), BNM Guidelines on outsourcing for Insurers
Yes.
The contract pack comprehensively sets out the scope of the arrangement
and the respective commitments of the parties. The services are broadly
described, along with the applicable usage rights, in the Product List and
the OST. The services are described in more detail in the OST, which
includes a list of service functionality at OST, page 10 and core features of
the Office 365 Services at pages 15-25.
3. Service levels and performance measures which should be consistent with
the IC’s outsourcing objectives and strategies.
Paragraph 10.10(b), BNM Guidelines on outsourcing for Insurers
Yes.
The SLA contains Microsoft’s service level commitment, as well as the
remedies for the customer in the event that Microsoft does not meet the
commitment. The terms of the SLA current at the start of the applicable
initial or renewal term of the Enrollment are fixed for the duration of that
term.
4. Clear identification and establishment of ownership of all assets (intellectual
and physical) relating to the outsourcing arrangement. Where relevant, the
service agreement should specify the terms governing the use of the IC’s
premises, personnel and equipment.
Paragraph 10.10(c), BNM Guidelines on outsourcing for Insurers
Yes.
Ownership of Customer Data remains at all times with the customer (see
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OST, page 8).
Terms governing the use of our premises, personnel and equipment are
not relevant.
5. Agreed responsibilities and duties of the Service Provider including:
- Compliance with relevant regulatory requirements and internal
policies of the IC;
- Provisions dealing with the protection and maintenance of the IC’s
data and assets which should be capable of logical separation at all
times from those handled by the Service Provider for other clients;
- Obligation of the Service Provider to maintain adequate insurance
coverage;
- Reporting requirements necessary to enable tie IC to effectively
monitor the performance of the Service Provider in a timely manner
as well as reporting of events that may materially affect the delivery
of service.
Paragraph 10.10(d), BNM Guidelines on outsourcing for Insurers
Compliance with relevant regulatory requirements and internal
policies of the IC:
Yes.
MBSA section 11m states that Microsoft and the customer each commit to
comply with all applicable privacy and data protection laws and
regulations.
Provisions dealing with the protection and maintenance of the IC’s
data and assets which should be capable of logical separation at all
times from those handled by the Service Provider for other clients:
Yes.
The customer retains the ability to access its Customer Data at all times
(OST, page 10), and Microsoft will deal with Customer Data in accordance
with Enrollment clause 6c(iv) and the OST. In summary: following
termination Microsoft will (unless otherwise directed by the customer)
delete the Customer Data after a 90 day retention period. Finally, from a
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technical perspective the wide availability and usage of Microsoft’s
products means that Customer Data can generally be extracted in a format
compatible with commonly available alternative products
Microsoft also makes specific commitments with respect to Customer Data
in the OST. In summary Microsoft commits that:
1. Ownership of Customer Data remains at all times with the customer
(see OST, page 8).
2. Customer Data will only be used to provide the online services to the
customer. Customer Data will not be used for any other purposes,
including for advertising or other commercial purposes (see OST,
page 8).
3. Microsoft will not disclose Customer Data to law enforcement unless it
is legally obliged to do so, and only after not being able to redirect the
request to the customer (see OST, page 8).
4. Microsoft will implement and maintain appropriate technical and
organizational measures, internal controls, and information security
routines intended to protect Customer Data against accidental,
unauthorized or unlawful access, disclosure, alteration, loss, or
destruction (see OST, page 8 and pages 11-13 for more details).
5. Microsoft will notify the customer if it becomes aware of any security
incident, and will take reasonable steps to mitigate the effects and
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minimize the damage resulting from the security incident (see OST,
page 9).
Obligation of the Service Provider to maintain adequate insurance
coverage:
Yes.
MBSA section 10 deals with insurance. In practice, Microsoft maintains
self-insurance arrangements for much of the areas where third party
insurance is typically obtained. Microsoft has taken the commercial
decision to take this approach, and does not believe that this detrimentally
impacts upon its customers given that Microsoft is an extremely
substantial entity.
Reporting requirements necessary to enable tie IC to effectively
monitor the performance of the Service Provider in a timely manner
as well as reporting of events that may materially affect the delivery
of service:
Yes.
The OST specifies the audit and monitoring mechanisms that Microsoft
puts in place in order to verify that the online services meet appropriate
security and compliance standards. This commitment is reiterated in the
FSA.
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Clause 1f of the FSA gives the customer the opportunity to participate in
the Microsoft Online Services Customer Compliance Program, which is a
for-fee program that facilitates the customer’s ability to (a) assess the
services’ controls and effectiveness, (b) access data related to service
operations, (c) maintain insight into operational risks of the services, (d) be
provided with additional notification of changes that may materially impact
Microsoft’s ability to provide the services, and (e) provide feedback on
areas for improvement in the services.
6. Obligations of the Service Provider to protect confidential information. This
should include a provision prohibiting the Service Provider and its agent from
using or disclosing the IC’s proprietary information or that of its customers,
except as necessary to provide the contracted services and to meet
regulatory and statutory provisions. The agreements should provide for the
IC to be promptly notified of any breach of confidentiality and address liability
for losses that might result from such a breach.
Paragraph 10.10(e), BNM Guidelines on outsourcing for Insurers
Yes.
MBSA section 3 deals with confidentiality. Under this section Microsoft
commits not to disclose our confidential information (which includes our
data) to third parties and to only use our confidential information for the
purposes of Microsoft’s business relationship with us. If there is a breach
of confidentiality by Microsoft, we are able to bring a claim for breach of
contract against Microsoft.
MBSA section 11m states that Microsoft and the customer each commit to
comply with all applicable privacy and data protection laws and
regulations.
Microsoft will notify the customer if it becomes aware of any security
incident, and will take reasonable steps to mitigate the effects and
minimize the damage resulting from the security incident (see OST, page
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9).
MBSA section 6 deals with liability. MBSA section 5 sets out Microsoft’s
obligation to defend the regulated entity against third party infringement
and breach of confidence claims. Microsoft’s liability under section 5 is
unlimited.
7. The basis for compensation and fees for the services provided as well as
circumstances under which additional charges may be imposed. Conditions
under which the payment structure may be changed should also be
addressed.
Paragraph 10.10(f), BNM Guidelines on outsourcing for Insurers
Yes.
Sales of Microsoft product to enterprise customers are made via a
Microsoft reseller, who sets the end price with the customer. The basis for
the pricing will therefore be set out in a separate agreement with
Microsoft’s reseller.
Microsoft has a variety of flexible licensing models. Please refer to the
arrangements with your Microsoft reseller for more information. In general,
the customer is required to commit to annual payments (payable in
advance) based upon the customer’s number of users.
8. Contingency arrangements outlining the Service Provider’s measures for
ensuring the continuation of the outsourced activity in the event of problems
affecting the Service Provider’s operation. The agreement should place an
obligation on the Service Provider to regularly test its business resumption
and contingency systems and to notify the IC of the test results. In addition,
the IC should be notified in the event that the Service Provider makes
Paragraph 10.10(g), BNM Guidelines on outsourcing for Insurers
Yes.
Business Continuity Management forms part of the scope of the
accreditation that Microsoft remains in relation to the online services, and
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significant changes to its contingency plans. Microsoft commits to maintain a data security policy that complies with
these accreditations (see OST page 13). Business Continuity
Management also forms part of the scope of Microsoft’s annual third party
compliance audit.
Under the Compliance Framework Program (if taken up by the customer),
Microsoft will provide communications to the customer regarding
significant changes to the business resumption and contingency plans.
9. Mechanisms for resolving disputes. This should include recourse of the
respective parties, procedures and period for resolution, indemnities,
obligations of the respective parties in the event of a dispute (such as
whether the Service Provider must continue to provide the service during the
dispute) as well as applicable laws and jurisdiction under which disputes will
be settled.
Paragraph 10.10(h), BNM Guidelines on outsourcing for Insurers
Yes.
MBSA section 11 contains provisions that describe how a dispute under
the contract is to be conducted.
MBSA section 11e sets out the jurisdictions in which parties should bring
their actions. Microsoft must bring actions against the customer in the
countries where the customer’s contracting party is headquartered. The
customer must bring actions against: (a) in Ireland if the action is against a
Microsoft affiliates in Europe; (b) in the State of Washington, if the action is
against a Microsoft affiliate outside of Europe; or (c) in the country where
the Microsoft affiliate delivering the services has its headquarters if the
action is to enforce a Statement of Services.
MBSA section 11h sets out the choice of law provision. Either, the
contract is governed by the laws of the State of Washington if the contract
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is with a Microsoft affiliate located outside of Europe; or the contract is
governed by the laws of Ireland if the contract is with a European Microsoft
affiliate.
MBSA section 6 deals with liability and rights of action. MBSA section 5
sets out Microsoft’s obligation to defend the regulated entity against third
party infringement and breach of confidence claims. Subject to the terms
of the MBSA, Microsoft’s liability under section 5 is unlimited.
10. Default events and remedies which should include a termination clause. In
particular, an IC should have the right to terminate the agreement if agreed
service levels are consistently not met, or when the Service Provider
undergoes a material change in ownership or encounters other
circumstances that might seriously impair its ability to provide the agreed
services. Appropriate notice should be required for termination which should
allow the IC to make alternative arrangements without significantly disrupting
operations. Clear procedures should also be specified for the return of the
IC’s intellectual or physical property in a timely manner.
Paragraph 10.10(i), BNM Guidelines on outsourcing for Insurers
Yes.
Termination rights for the Enrollment are set out in the Enrollment itself,
and in section 6 of the EA. If the Enrollment is terminated, this will
terminate all products and services ordered under the Enrollment (except
to the extent that the customer has perpetual rights).
Online services may also be terminated or suspended in the
circumstances described in section 6d of the EA, and as specified in the
OST, pages 5, 11 and 30.
In the event of default, the provisions of the SLA will apply to service level
failures and page 9 of the OST sets out arrangements in the event of
security incidents. Other defaults are addressed in the MBSA and EA. A
termination right for cause is set out at section 6c of the EA.
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The contract also allows the customer to terminate the arrangement with
Microsoft for convenience (MBSA section 8) which means the customer
has the right to terminate in the event of default including change of
ownership, insolvency or where there is a breach of security or
confidentiality or demonstrable deterioration in the ability of the Service
Provider to perform the service as contracted.
Note also that customers have control over the use they make of, and data
they load into, the online service.Yes.
Microsoft contractually commits to retain our data stored in the Online
Service in a limited function account for 90 days after expiration or
termination of our subscription so that we may extract the data. After the
90 day retention period ends, Microsoft will disable our account and delete
our data (OST, page 5).
In addition, the customer retains the ability to access its Customer Data at
all times (OST, page 10), and Microsoft will deal with Customer Data in
accordance with Enrollment clause 6c(iv) and the OST. Finally, MBSA
section 11m states that Microsoft and the customer each commit to
comply with all applicable privacy and data protection laws and
regulations.
11. Audit and inspection rights for the insurer to evaluate or alternatively cause
an independent auditor to evaluate on its behalf the service provided. This
should include the ability of the IC to review all books, records, information,
systems and the internal control environment (including access to relevant
Paragraph 10.10(j), BNM Guidelines on outsourcing for Insurers
Yes.
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audit reports) in the Service Provider that are relevant to the outsourced
activity.
The OST specifies the audit and monitoring mechanisms that Microsoft
puts in place in order to verify that the online services meet appropriate
security and compliance standards. This commitment is reiterated in the
FSA.
In addition, clauses 1e and 1f of the FSA detail the examination and
influence rights that are granted to the customer and BNM.
Clause 1e sets out a process which can culminate in the regulator’s
examination of Microsoft’s premises.
Clause 1f gives the customer the opportunity to participate in the Microsoft
Online Services Customer Compliance Program, which is a for-fee
program that facilitates the customer’s ability to (a) assess the services’
controls and effectiveness, (b) access data related to service operations,
(c) maintain insight into operational risks of the services, (d) be provided
with additional notification of changes that may materially impact
Microsoft’s ability to provide the services, and (e) provide feedback on
areas for improvement in the services.
12. Appropriate limitations concerning the ability of the Service Provider to
subcontract any part of the outsourced activity to a third party. The approval
of the IC should be required for the use of subcontractors and the IC is
expected to ensure that the conditions for subcontracting allow the IC to
maintain similar control over the outsourcing relationship and outsourcing
risks as if the service were not subcontracted.
Paragraph 10.10(k), BNM Guidelines on outsourcing for Insurers
Yes.
See page 9 of the OST, under which Microsoft is permitted to hire
subcontractors.
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The confidentiality of our data is protected when Microsoft uses
subcontractors because Microsoft commits that its subcontractors “will be
permitted to obtain Customer Data only to deliver the services Microsoft
has retained them to provide and will be prohibited from using Customer
Data for any other purpose” (OST, page 9).
Microsoft commits that any subcontractors to whom Microsoft transfers our
data will have entered into written agreements with Microsoft that are no
less protective than the data processing terms in the OST (OST, page 11).
Under the terms of the OST, Microsoft remains contractually responsible
(and therefore liable) for its subcontractors’ compliance with Microsoft’s
obligations in the OST (OST, page 9). In addition, Microsoft’s commitment
to ISO/IEC 27018, requires Microsoft to ensure that its subcontractors are
subject to the same security controls as Microsoft is subject to. Finally, the
EU Model Clauses, which are included in the OST, require Microsoft to
ensure that its subcontractors outside of Europe comply with the same
requirements as Microsoft and set out in detail how Microsoft must achieve
this.
Microsoft maintains a list of authorized subcontractors for the online
services that have access to our data and provides us with a mechanism
to obtain notice of any updates to that list (OST, page 10). The actual list is
published on the applicable Trust Center. If we do not approve of a
subcontractor that is added to the list, then we are entitled to terminate the
affected online services.
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13. The service agreement should stipulate a defined time frame for the
provision of services which may include an option for the IC to renew the
terms of the service if desired. ICs are expected to regularly review the
service agreement to assess whether the agreement needs to be
renegotiated to bring it in line with current market standards and to cope with
changes in business strategies. For this purpose, a clause should be
included in the service agreement to allow for such interim reviews under
reasonable circumstances.
Paragraph 10.11, BNM Guidelines on outsourcing for Insurers
Enrollments have a three year term, and may be renewed for a further
three year term. A review would therefore take place at least every three
years, although amendments can be made more regularly. Section 11k of
the MBSA states that the contract may be amended only by a formal
written agreement signed by both parties.
14. The service agreement must not contain any clause that would:
- Prevent an IC from modifying or terminating an outsourcing
arrangement pursuant to a directive of the bank;
- Affect the right of a customer against the IC, including the right to
obtain redress;
- Impede the IC from meeting its regulatory obligations, or the BNM
from exercising its supervisory powers; or
- Preclude the service from being continued in situations where the
BNM or a person appointed by the BNM takes control of the IC or
where the IC is in liquidation.
Paragraph 10.12, BNM Guidelines on outsourcing for Insurers
Microsoft does not believe that any of these provisions are included in the
contractual documents. You should confirm that this is the case. If you
have any questions, please do not hesitate to get in touch with your
Microsoft contact.
We confirm that our agreement with Microsoft does not contain any such
clauses.
15. The service agreement should specify the requirements for ensuring the
continuity of the outsourcing vendor’s services. Recovery time objectives
(RTO) should be built into the outsourcing contract with provisions for legal
Paragraph 111, BCM Guidelines
Yes.
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liability should the RTO not be achieved. Business Continuity Management forms part of the scope of the
accreditation that Microsoft remains in relation to the online services, and
Microsoft commits to maintain a data security policy that complies with
these accreditations (see OST page 13). Business Continuity
Management also forms part of the scope of Microsoft’s annual third party
compliance audit.
RTO requirements are set out in the SLA and this also includes the
provision for service credits if Microsoft fails to meet the commitments in
the SLA. If a failure by Microsoft also constitutes a breach of contract to
which the service credits regime does not apply, we would of course have
ordinary contractual claims available to us too under the contract.
16. Service agreements for contracted services should clearly prohibit the
unauthorized disclosure of confidential data by the external party and provide
for adequate remedies.
Paragraph 4.25, Guidelines on Data Management and MIS Framework
Yes.
MBSA section 3 deals with confidentiality. Under this section Microsoft
commits not to disclose our confidential information (which includes our
data) to third parties and to only use our confidential information for the
purposes of Microsoft’s business relationship with us. If there is a breach
of confidentiality by Microsoft, we are able to bring a claim for breach of
contract against Microsoft.
17. The written, enforceable agreement should set out the governing roles,
relationships, obligations and responsibilities of all contracting parties. It
should also cover: performance expectations, service levels, availability,
Section II, paragraph 15(c), Guidelines on Management of IT Environment
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reliability, scalability, compliance, security and confidentiality, back processes
facility, contingency planning, right to audit contractual responsibilities and
discontinuation of services and returning all information.
Yes.
All of these points are covered, taking each in turn:
1. The contract pack comprehensively sets out the scope of the
arrangement and the respective commitments of the parties. The
services are broadly described, along with the applicable usage
rights, in the Product List and the OST. The services are
described in more detail in the OST, which includes a list of
service functionality at OST, page 10 and core features of the
Office 365 Services at pages 15-25.
2. The SLA contains Microsoft’s service level commitment, as well as
the remedies for the customer in the event that Microsoft does not
meet the commitment.
3. MBSA section 11m states that Microsoft and the customer each
commit to comply with all applicable privacy and data protection
laws and regulations.
4. Microsoft also makes specific commitments with respect to
Customer Data in the OST, including that Microsoft will implement
and maintain appropriate technical and organizational measures,
internal controls, and information security routines intended to
protect Customer Data against accidental, unauthorized or
unlawful access, disclosure, alteration, loss, or destruction (see
OST, page 8 and pages 11-13 for more details).
5. MBSA section 3 deals with confidentiality. Under this section
Microsoft commits not to disclose our confidential information
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(which includes our data) to third parties and to only use our
confidential information for the purposes of Microsoft’s business
relationship with us. If there is a breach of confidentiality by
Microsoft, we are able to bring a claim for breach of contract
against Microsoft.
6. Business Continuity Management forms part of the scope of the
accreditation that Microsoft remains in relation to the online
services, and Microsoft commits to maintain a data security policy
that complies with these accreditations (see OST page 13).
7. The OST specifies the audit and monitoring mechanisms that
Microsoft puts in place in order to verify that the online services
meet appropriate security and compliance standards. This
commitment is reiterated in the FSA.
8. Online services may also be terminated or suspended in the
circumstances described in section 6d of the EA, and as specified
in the OST, pages 5, 11 and 30. The contract also allows the
customer to terminate the arrangement with Microsoft for
convenience (MBSA section 8).
9. Microsoft contractually commits to retain our data stored in the
Online Service in a limited function account for 90 days after
expiration or termination of our subscription so that we may extract
the data. After the 90 day retention period ends, Microsoft will
disable our account and delete our data (OST, page 5).
18. The agreement should explicitly mention BNM’s right to independently
assess, when necessary and regardless of the location, the competence and
Section II, paragraph 15(c), Guidelines on Management of IT Environment
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the operational and financial performance of the service provider. Yes.
The OST specifies the audit and monitoring mechanisms that Microsoft
puts in place in order to verify that the online services meet appropriate
security and compliance standards. This commitment is reiterated in the
FSA.
In addition, clauses 1e and 1f of the FSA detail the examination and
influence rights that are granted to the customer and BNM.
Clause 1e sets out a process which can culminate in the regulator’s
examination of Microsoft’s premises.
Clause 1f gives the customer the opportunity to participate in the Microsoft
Online Services Customer Compliance Program, which is a for-fee
program that facilitates the customer’s ability to (a) assess the services’
controls and effectiveness, (b) access data related to service operations,
(c) maintain insight into operational risks of the services, (d) be provided
with additional notification of changes that may materially impact
Microsoft’s ability to provide the services, and (e) provide feedback on
areas for improvement in the services.
19. The agreement should be legally binding. It should outline all expected
service levels and the agreement is properly executed to protect the
institution’s interests.
Part IV, paragraph 1(e), Guidelines on Management of IT Environment
Yes.
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The contractual documents are all written and clear and legally binding.
The SLA contains Microsoft’s service level commitment, as well as the
remedies for the customer in the event that Microsoft does not meet the
commitment. The terms of the SLA current at the start of the applicable
initial or renewal term of the Enrollment are fixed for the duration of that
term.
20. The agreement should be legally binding and properly executed. The
agreement should oblige vendors to comply with good business practices
that maintain the confidentiality and integrity of information and permit their
activities to be audited.
Part V, paragraph 1(c), Guidelines on Management of IT Environment
Yes.
The contractual documents are all written and clear and legally binding.
The agreement is signed.
MBSA section 4(a)(i) deals with professional conduct. Microsoft warrants
that its services will be performed with professional care and skill.
MBSA section 3 deals with confidentiality. Under this section Microsoft
commits not to disclose our confidential information (which includes our
data) to third parties and to only use our confidential information for the
purposes of Microsoft’s business relationship with us. If there is a breach
of confidentiality by Microsoft, we are able to bring a claim for breach of
contract against Microsoft.
The OST specifies the audit and monitoring mechanisms that Microsoft
puts in place in order to verify that the online services meet appropriate
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security and compliance standards. This commitment is reiterated in the
FSA.
21. If communications services are obtained from external service providers, the
institution should ensure that the roles and responsibilities and expected
service levels are defined in formal and enforceable agreements. The
agreement should specific arrangements for ensuring continuity of service
(i.e. detection and recovery from service interruptions).
Part VI, paragraph 3(c), Guidelines on Management of IT Environment
Yes.
The contract pack comprehensively sets out the scope of the arrangement
and the respective commitments of the parties. The SLA contains
Microsoft’s service level commitment, as well as the remedies for the
customer in the event that Microsoft does not meet the commitment.
Business Continuity Management forms part of the scope of the
accreditation that Microsoft remains in relation to the online services, and
Microsoft commits to maintain a data security policy that complies with
these accreditations (see OST page 13). Business Continuity
Management also forms part of the scope of Microsoft’s annual third party
compliance audit.
22. The agreement should be legally binding and properly executed to protect
the institution’s interests. The agreement should oblige vendors to comply
with good business practices that maintain the confidentiality and integrity of
information, provide regular reports on network performance, maintain
continuity of services in the event of a disaster and permit the vendor’s
activities to be audited.
Part VI, paragraph 3(e), Guidelines on Management of IT Environment
Yes.
The contractual documents are all written and clear and legally binding.
All of these points are covered, taking each in turn:
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1. MBSA section 4(a)(i) deals with professional conduct. Microsoft
warrants that its services will be performed with professional care
and skill.
2. MBSA section 3 deals with confidentiality. Under this section
Microsoft commits not to disclose our confidential information
(which includes our data) to third parties and to only use our
confidential information for the purposes of Microsoft’s business
relationship with us. If there is a breach of confidentiality by
Microsoft, we are able to bring a claim for breach of contract
against Microsoft.
3. The customer may monitor the performance of the online services
via the administrative dashboard, which includes real time
information as to Microsoft compliance with its SLA commitments.
4. Business Continuity Management forms part of the scope of the
accreditation that Microsoft remains in relation to the online
services, and Microsoft commits to maintain a data security policy
that complies with these accreditations (see OST page 13).
5. The OST specifies the audit and monitoring mechanisms that
Microsoft puts in place in order to verify that the online services
meet appropriate security and compliance standards. This
commitment is reiterated in the FSA. Clause 1f of the FSA gives
the customer the opportunity to participate in the Microsoft Online
Services Customer Compliance Program, which is a for-fee
program that facilitates the customer’s ability to (a) assess the
services’ controls and effectiveness, (b) access data related to
service operations, (c) maintain insight into operational risks of the