Checklist for Cloud Vendor Regulatory Compliance

When choosing a cloud vendor, ensuring regulatory compliance is essential to protect your organisation from legal risks, financial penalties, and reputational damage. Here's a quick summary of what you need to know:

• Why Compliance Matters: Failing to comply with GDPR or the UK Data Protection Act 2018 can lead to fines of up to £17.5 million or 4% of annual turnover. High-profile breaches, like those involving British Airways (£20m fine) and Marriott Hotels (£18.4m fine), highlight the risks.
• Certifications to Check: Look for certifications like ISO 27001 (information security), SOC 2 (service provider controls), Cyber Essentials (basic UK cybersecurity), and PCI DSS (payment data security). Ensure certifications are current and relevant to your needs.
• Key Vendor Checks: Verify certifications, request audit reports, assess data residency and encryption practices, and review physical and network security measures.
• Shared Responsibility: Understand what security tasks your vendor handles and what your organisation must manage, especially for SaaS, PaaS, or IaaS models.
• Contracts and SLAs: Include clear compliance clauses, audit rights, breach notifications, and exit procedures in agreements.
• Ongoing Monitoring: Use automated tools to track compliance and address risks. Regular reviews ensure vendors keep up with regulatory changes.

Quick Tip: Start with a compliance checklist that evaluates certifications, security controls, and governance practices. Update it regularly to stay aligned with evolving regulations and standards.

Cloud Compliance Regulations Checklist for 2025

Required Certifications and Standards for Cloud Vendors

Cloud vendors need to demonstrate compliance through recognised certifications that validate secure data handling and adherence to regulations. Knowing which certifications are most relevant to your industry is crucial when choosing a vendor. Below, we’ll dive into the certifications you should consider.

Certification requirements can vary significantly by industry and location. For example, the UK's financial services sector faces constant shifts in regulations. As AWS explains:

Regulations are changing rapidly in this space, and AWS is working to help customers proactively respond to new rules and guidelines [1].

Core Certifications and Standards

ISO 27001 is widely regarded as the top standard for information security management systems. It ensures that a vendor has robust security measures in place across systems, personnel, and processes [6]. The standard focuses on risk-based security management and continuous improvement, making it especially valuable for organisations managing sensitive data.

SOC 2 compliance is tailored to service providers, assessing their security, availability, and confidentiality measures. Unlike ISO 27001, which focuses on creating a management framework, SOC 2 evaluates the actual security controls in place [2]. This makes it particularly relevant for cloud services where the vendor’s operational security is critical.

Cyber Essentials is a UK-specific certification backed by the government. It covers five key technical controls: firewalls, secure configuration, user access control, malware protection, and patch management [6]. As of November 2024, approximately 27,000 UK organisations have achieved Cyber Essentials certification [5]. The more rigorous Cyber Essentials Plus includes hands-on technical assessments to verify security measures.

PCI DSS is mandatory for vendors handling payment card data. This standard applies regardless of transaction volume and includes specific requirements for cloud providers managing cardholder information.

GDPR compliance is essential for any vendor processing personal data of UK or EU residents. Interestingly, ISO 27001 covers around 75-80% of GDPR compliance needs [4], making it a strong foundation for meeting data protection requirements.

For financial services, additional scrutiny is required. UK financial institutions can use cloud services as long as they meet legal and regulatory requirements [1]. Key regulators include the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and the Bank of England (BoE) [1]. FCA-regulated firms should consult SYSC 8 and SYSC 13 of the FCA Handbook, while PRA-regulated firms should review the Outsourcing and Notifications sections of the PRA Rulebook [1].

Checklist for Verifying Vendor Certifications

When evaluating a vendor’s certifications, it’s essential to ensure they align with your specific needs:

• Check the certification scope: Make sure it covers the services you plan to use and the data centres where your data will reside [3]. A certification without relevant scope offers limited assurance.
• Confirm certifications are up to date: Look for evidence of regular audits. This shows a commitment to maintaining security rather than a one-time effort [3].

It is the **evidence** presented with such standards and certifications that can give you confidence in the service, **not** the fact that a service holds a certification. [3]

• Request detailed audit reports: For example, SOC 2 Type II reports provide insights into how effective controls are over a specific period. These go beyond just having documented policies to showing operational effectiveness.
• Research independently: Go beyond the vendor’s materials. Investigate their security maturity, team reputation, and historical response to incidents. Open-source research can reveal insights that certifications alone may not cover [3].
• Review contractual commitments: Ensure contracts specify measurable security and data handling standards [3]. For instance, instead of vague terms like industry-standard encryption, demand details about encryption algorithms and key management processes.
• Seek third-party validation: Look for evidence of penetration tests and code reviews conducted as part of a structured process. Regular independent assessments indicate mature security practices [3].

This process isn’t a one-and-done exercise. Regulations change frequently, and vendors’ compliance measures evolve. Establishing regular review cycles ensures your vendor choices remain aligned with both current standards and your organisation’s risk tolerance. These steps are a key part of assessing overall compliance and evaluating data protection measures.

Data Protection, Privacy, and Security Controls

When assessing vendors, it’s not just about certifications. It’s equally important to examine how they safeguard your data. This means looking at their technical defences, physical and network security measures, and how transparent they are about handling your information. In 2021, 44% of organisations reported data breaches, with many incidents linked to poor evaluations of third-party vendor risks [8].

Checking Data Residency and Encryption

Beyond certifications, pay close attention to where vendors store your data and how they use encryption to protect it. Data residency refers to the physical location of stored data, and under UK GDPR, international data transfers come with strict requirements, such as Standard Contractual Clauses. Keeping data within the UK or EU can simplify compliance by avoiding the added complexity of cross-border safeguards.

Encryption is one of the most effective tools for securing information. Article 32 of the UK GDPR highlights the importance of implementing technical and organisational measures to match the level of security with the risks involved:

Taking into account the state of the art, the costs of implementation and the nature, scope, context and purposes of processing as well as the risk of varying likelihood and severity for the rights and freedoms of natural persons, the controller and the processor shall implement appropriate technical and organisational measures to ensure a level of security appropriate to the risk [7].

Vendors should clearly outline their encryption policies, including when and how encryption is applied. This should be backed by staff training to ensure protocols are followed [10].

To ensure proper security, conduct data mapping to identify where personal data is stored and processed [11]. Ask vendors for specific details about their encryption methods for data at rest and in transit. Vague terms like industry-standard encryption aren’t enough - clarity on the algorithms used, key management processes, and access to decryption keys is essential.

Non-compliance with GDPR carries heavy penalties, with fines reaching up to £20 million or 4% of annual global turnover, whichever is higher [11]. In fact, the European Data Protection Board’s 2023 report revealed fines exceeding £1.3 billion [9].

Reviewing Physical and Network Security

Strong physical security is the backbone of data protection. Vendors’ data centres should have strict access controls, such as secure entry systems and surveillance, to keep sensitive information safe.

Network security is just as critical. Vendors should enforce rigorous access controls, conduct regular penetration testing, and have robust incident response plans. They must demonstrate how they monitor network traffic, detect unusual activity, and respond swiftly to threats.

GDPR requires vendors to report data breaches to the supervisory authority within 72 hours. This tight deadline demands well-practised response procedures and dependable communication systems.

Ask vendors for evidence of regular security evaluations, including penetration testing and vulnerability assessments. They should also provide documentation on how they address any identified weaknesses. The ICO considers these measures when determining fines [7], making strong vendor security a key factor in reducing regulatory risks.

Additionally, evaluate vendors’ firewalls, intrusion detection systems, network segmentation, and backup strategies. Make sure they have protections in place for both external attacks and internal risks, such as through staff vetting and controlled access. These efforts not only strengthen security but also enhance transparency in data handling.

Vendor Transparency in Data Processing

Transparency in how vendors process data is the final piece of the compliance puzzle. Vendors must openly share their data handling practices, which demonstrates accountability and helps identify areas needing improvement [12].

Good Vendor Access Management (VAM) ensures that only authorised personnel can access sensitive data [13]. Vendors should maintain clear policies for each account, with monitoring and access logs to back them up.

When negotiating contracts, insist on clear commitments about how your data will be managed, who will access it, and under what circumstances. Including audit rights in vendor contracts allows you to verify these practices in action [12].

Transparency should also cover subprocessors. Vendors must document the security and compliance measures they expect from their partners.

For an added layer of security, vendor privileged access management (VPAM) should integrate with your organisation’s broader identity and access management (IAM) system. This ensures visibility into authorised activities and maintains consistent security standards across your entire environment [13]. Regular testing, including penetration tests and vulnerability assessments, ensures that these controls remain effective [13].

Governance, Risk Management, and Shared Responsibility

After evaluating data protection and security controls, the next step is setting up clear governance and responsibility frameworks to ensure compliance stays on track. Managing cloud vendors effectively involves more than just ticking off certifications and security measures. It requires structured governance that defines responsibilities, outlines risk assessment and monitoring processes, and specifies actions for addressing issues. According to the 2023 Flexera State of the Cloud Report, 71% of organisations identified governance as a major cloud challenge [14], underlining its importance in vendor relationships.

Understanding Shared Responsibilities

The shared responsibility model is central to cloud vendor partnerships, but many organisations struggle to pinpoint where their duties stop and the vendor's begin. Cloud providers handle infrastructure security (often referred to as security of the cloud), while customers are responsible for configurations, user access, and data protection (security within the cloud) [16][18][17].

The division of responsibilities depends heavily on the service model:

• Software as a Service (SaaS): Vendors manage most security tasks, leaving you to focus on user access and data governance.
• Platform as a Service (PaaS): You take on additional responsibilities, such as securing applications and protecting data.
• Infrastructure as a Service (IaaS): The heaviest burden falls on you, as you're responsible for securing everything built on the rented infrastructure.

Recent statistics show that 98% of businesses experienced a cloud-data breach in the past 18 months, yet only 13% fully understand their cloud-security responsibilities [17]. Even more worrying, by 2025, 99% of cloud-security failures are expected to stem from customer errors [17].

To avoid becoming part of these statistics, organisations should carefully review service level agreements (SLAs) to identify and address any grey areas where responsibilities overlap. Documenting these distinctions not only helps internal teams understand their roles but also proves invaluable during audits. This clarity is the foundation for drafting precise compliance clauses in SLAs.

Risk Assessment and Monitoring

Vendor risk assessment isn’t a one-time task - it’s an ongoing process that requires consistent evaluation and monitoring. In 2024, third-party risks, including ransomware attacks and vendor outages, accounted for 31% of cyber insurance claims [19].

High-profile ransomware incidents in 2024, such as those impacting UnitedHealth Group and CDK Global, highlight the need for robust vendor risk assessments [19]. These assessments should begin during the vendor selection phase, not after contracts are finalised. Involving risk teams early in the process [19] can prevent costly surprises. Use objective criteria - like financial stability, cybersecurity measures, operational capacity, and industry reputation - to guide evaluations [15]. Additionally, engage multiple stakeholders (e.g., IT, legal, compliance, and business leaders) to ensure a thorough review [15].

Start by assessing key factors such as data sensitivity, regulatory exposure, financial impact, and operational dependencies [15]. Categorise vendors by risk levels using standardised templates like CAIQ or SIG [15][19] to prioritise monitoring efforts. Vendors handling sensitive data or critical operations should undergo more rigorous scrutiny.

Quantify risks with scoring systems to compare vendors and prioritise actions [19]. Formalising these criteria ensures consistency across teams and vendor types [15].

Risk assessments don’t stop at onboarding. Reassess vendors periodically, especially after service changes, security breaches, or regulatory updates [15]. Establish key performance indicators (KPIs) and use regular performance scorecards to track vendor compliance [15]. For high-risk vendors, consider conducting reviews quarterly or semi-annually [15].

With 60% of organisations working with over 1,000 third-party vendors [19], manual tracking becomes impractical. Use a centralised platform to monitor vendors, track services, and maintain visibility into risk ratings [19]. These assessments also inform the contractual obligations outlined in SLAs.

Compliance Clauses in Service Level Agreements

SLAs are the legal backbone of vendor relationships, making it critical to include well-defined compliance clauses. These clauses turn regulatory requirements into enforceable terms.

Clearly outline service levels, security expectations, performance reporting, and compliance obligations [15]. Avoid vague language - define compliance in practical terms. For example, if your organisation is subject to GDPR, specify requirements for data processing records, breach notifications, and data subject rights. In financial services, include PCI DSS requirements and audit expectations.

Key clauses to include:

• Audit rights: Ensure you can verify the vendor’s compliance controls [15].
• Breach notifications: Align with regulatory timelines, such as GDPR’s 72-hour notification requirement.
• Liability and indemnification: Clearly define accountability for breaches or failures.
• Exit procedures: Specify obligations for data migration, destruction, and service continuity.

Centralising contract management - whether through vendor management software or structured internal processes - prevents fragmentation and ensures consistent standards [15]. Dispersed contracts can lead to compliance gaps and make it harder to maintain oversight.

Regularly review and update contracts to reflect evolving business needs and regulatory changes [15]. Contracts signed years ago may no longer align with current requirements, so periodic updates are essential.

To set measurable expectations, reference specific frameworks like ISO 27001 or SOC 2 instead of generic terms like industry-standard security. This creates clear benchmarks for both parties.

Finally, ensure vendor exit clauses cover all necessary details, including data handling, service continuity, and intellectual property rights. Draft detailed exit checklists to streamline transitions and secure compliance [15].

Compliance Monitoring and Reporting

Once SLAs and governance structures are established, the next step is ensuring ongoing compliance through systematic monitoring and reporting. This process involves continuously checking that your organisation adheres to both regulatory and internal standards [20]. By doing so, businesses can manage risks effectively and keep pace with the ever-changing regulatory environment [20]. Let’s take a closer look at how continuous monitoring and vendor adaptability strengthen your compliance framework.

Failing to monitor compliance can lead to serious consequences. For example, in March 2022, SafetyDetectives revealed that Pegasus Airlines had exposed a staggering 6.5 terabytes of sensitive data online due to an unprotected AWS S3 bucket. This breach included around 23 million files, such as critical flight data, crew personal information, and even software code. The root cause? A poorly configured cloud setup caused by human error, leaving the data vulnerable [22]. This case underscores the importance of maintaining constant oversight to avoid such costly mistakes.

Continuous Monitoring and Audit Support

Compliance monitoring isn’t just about periodic reviews - it’s about having real-time insights into your cloud vendor’s security and regulatory adherence. Automated tools can audit cloud configurations and flag potential compliance violations as they happen [21]. Many modern tools offer real-time monitoring, automated reporting, and seamless compatibility with major cloud providers like AWS, Azure, and Google Cloud [28]. When choosing monitoring solutions, prioritise those that align with key regulations such as GDPR, HIPAA, PCI-DSS, and CCPA, ensuring they integrate smoothly with your chosen platforms [28].

Proper documentation and clear role definitions are also critical for effective audits. Standardised documentation templates not only help meet regulatory requirements but also form the backbone of both internal reviews and external audits [21]. A RACI matrix (Responsible, Accountable, Consulted, Informed) can further clarify responsibilities for compliance activities, reducing the risk of oversight and ensuring accountability. Regular mock audits can highlight weaknesses before they become an issue during formal inspections [21]. These measures work hand-in-hand with the governance framework already in place.

For centralised security and compliance insights, platforms like AWS Security Hub and Azure Security Center are invaluable. AWS Security Hub offers visibility across multiple AWS accounts [27], while Azure Security Center extends its monitoring capabilities to on-premises, Azure, and other cloud environments [28]. In multi-cloud setups, tools like Prisma Cloud by Palo Alto Networks provide over 1,000 compliance checks, leveraging AI for real-time monitoring [28]. These tools, combined with robust documentation and role clarity, ensure day-to-day compliance.

Adapting to Regulatory Changes

Regulatory requirements are constantly evolving, making vendor adaptability a critical factor in maintaining compliance. A recent report found that 38% of UK firms have seen a sharp rise in regulatory workloads, with some organisations spending up to £50 million annually on compliance [26]. The financial risks of non-compliance are also growing - GDPR fines reached €1.2 billion in 2024 alone [26].

Cloud vendors must be proactive in responding to these changes. For example, Microsoft annually prepares documentation to meet G-Cloud compliance requirements, with random checks conducted by GDS accreditors to ensure standards are upheld [23]. This level of preparedness demonstrates the importance of transparent and timely updates.

Recent developments highlight the need for agility. On 2 April 2025, the European Commission’s Expert Group on B2B Data Sharing and Cloud Computing Contracts released its final report. This included guidelines and model contractual terms (MCTs) to support the Data Act, which will largely take effect from 12 September 2025 [25]. Similarly, the UK’s approach to cybersecurity aligns with the EU’s NIS2 Directive while addressing UK-specific risks [25].

To assess a vendor’s adaptability, regularly review their documentation and certifications. Ensure that contracts include clauses requiring vendors to adjust to new regulations, and engage in industry forums or user groups to stay informed about best practices. Regular vendor audits are also essential for staying ahead of regulatory changes.

Vendors should notify customers well in advance of any regulatory updates, giving organisations time to adjust their internal processes. As Baker McKenzie Resource Hub notes:

The PRA expects written agreements for material outsourcing to indicate whether material sub-sourcing is permitted, and if a service provider must obtain specific or general written authorisation from the firm before transferring data (Article 28 of the General Data Protection Regulation) [24].

Look for vendors who provide clear guidance on how regulatory changes impact their services and offer actionable steps for compliance. Vendors with dedicated compliance teams, regular updates, and clear migration paths are better equipped to help organisations navigate evolving requirements. Monitoring a vendor’s adaptability should be a key consideration when selecting a compliance partner.

Combining Compliance with Cloud Cost and DevOps

Regulatory compliance doesn’t have to be a bottleneck for development or a drain on cloud budgets. Many modern organisations are weaving compliance directly into their DevOps workflows while keeping costs in check. By shifting from reactive compliance checks to proactive integration, regulatory requirements can actually become a driver of business value. Let’s explore how to embed compliance into DevOps pipelines and manage costs effectively.

Adding Compliance to DevOps Pipelines

Traditional compliance methods often slow down DevOps processes. However, continuous compliance changes the game by embedding regulatory controls into CI/CD pipelines, enabling secure and agile deployments [29]. This approach treats compliance as code, allowing organisations to define regulatory requirements programmatically. Tools can then automatically evaluate infrastructure and application configurations to ensure compliance [29].

For example, a payments company streamlined PCI DSS compliance for their AWS deployments by using Terraform with Sentinel policies, pre-deployment checks via Open Policy Agent (OPA) in GitHub Actions, automated secrets scanning, and analysing CloudTrail logs with Amazon Athena. This setup cut their audit preparation time from weeks to just days [29].

Here’s how to make it work:

• Add policy validation steps to CI/CD pipelines, much like linting or unit tests.
• Use Infrastructure as Code (IaC) to maintain consistent, version-controlled infrastructure.
• Implement continuous monitoring to catch policy violations after deployment.
• Automate evidence generation and storage to simplify audits while keeping detailed compliance records.

Hokstad Consulting helps organisations build automated CI/CD pipelines that incorporate compliance checks without disrupting workflows. Their expertise lies in reducing deployment cycles while ensuring regulatory requirements are met through tailored development and automation.

One common challenge is developer resistance, often caused by unclear policies. Involving developers in policy creation and providing clear feedback in the pipelines can help overcome this. Additionally, fine-tuning rules and using tiered alerting systems can minimise false positives, reducing unnecessary noise while maintaining security standards [29].

Balancing Compliance and Cost Control

Integrating compliance into pipelines is just one piece of the puzzle. Aligning compliance with cost control is another way to boost efficiency [31]. This involves balancing financial prudence with regulatory requirements to manage risks while maintaining operational stability [31].

Cost transparency is key. By implementing clear tagging and labelling systems, organisations can track compliance-related expenses and identify areas for optimisation. Cost-saving measures like reserved instances and auto-scaling can also help reduce expenses without compromising compliance.

Real-world examples highlight these benefits:

• In July 2025, a healthcare organisation cut cloud costs by 30% while maintaining HIPAA compliance through automated resource provisioning and encryption [31].
• An e-commerce platform optimised spending by rightsizing instances while adhering to PCI DSS standards, achieving better security and cost efficiency [31].
• A multinational corporation adopted FinOps practices to align GDPR compliance with cloud spending, saving millions annually [31].

Automating processes such as resource provisioning, cost tracking, and compliance reporting further reduces manual effort and ensures consistent adherence to regulatory standards. This approach enables organisations to implement cost-saving measures like rightsizing and reserved instances while staying compliant. Automation not only simplifies compliance but also uncovers opportunities for cost optimisation.

Hokstad Consulting’s cloud cost engineering services focus on achieving these dual goals. They typically help clients reduce expenses by 30–50% while maintaining compliance. Their approach includes thorough cost audits, strategy development, and ongoing optimisation to ensure both financial efficiency and regulatory alignment.

Regular reviews of cloud usage help identify new optimisation opportunities and address compliance gaps as business needs evolve [31]. This iterative process adapts to changing regulations and cloud pricing models, ensuring organisations remain both cost-efficient and compliant.

Incorporating compliance checks into automated CI/CD pipelines is essential for maintaining a secure application environment while controlling costs [30]. By defining security policies as code and enforcing them programmatically, organisations can achieve regulatory compliance without manual intervention or excessive resource use. This integrated approach turns compliance from a burden into a strategic advantage, aligning regulatory needs with business goals and financial discipline.

Next Steps for Vendor Evaluation

A checklist is just the starting point; its effectiveness lies in how well it’s implemented and kept up to date. Microsoft's Cloud Services Due Diligence Checklist simplifies ISO standards into a concise, two-page guide, offering a structured and repeatable process for selecting cloud providers [32]. As Microsoft puts it:

The checklist promotes a thoroughly vetted move to the cloud, provides structured guidance, and a consistent, repeatable approach for choosing a cloud service provider [32].

Here’s a breakdown of the key elements for evaluating vendors effectively.

Key Points from the Checklist

Start by defining clear objectives and detailed requirements. Understand your business goals, the regulations that apply to you, and the level of risk your organisation is willing to accept.

Bring together a cross-functional team for the evaluation process. This team should include the CIO, CISO, and representatives from legal, risk management, procurement, and compliance. Use standardised questionnaires to compare providers fairly. Vendors should then be categorised based on their importance and the sensitivity of the data they handle. The depth of your due diligence should align with the risk level. The financial implications are significant; in 2020, data breaches cost an average of £3.5 million, while banks faced around £9.3 billion in compliance fines [34].

Once these steps are in place, the checklist can be implemented through clearly defined roles, robust service-level agreements (SLAs), and ongoing monitoring.

How to Implement This Checklist

To put the checklist into action, start by defining clear objectives and assigning responsibilities. Build a solid governance framework with well-defined SLAs and ensure all documentation is easily accessible. Setting clear contractual obligations for vendors and requiring regular compliance reports can boost transparency and accountability.

Continuous monitoring plays a critical role in vendor management. Use alerts and triggers to identify changes in the vendor's environment that might increase risk. Adjust reassessment cycles depending on how critical the vendor is to your operations. Automated cloud compliance tools can be a huge help, reducing manual workloads by collecting audit-ready evidence and supporting multiple industry standards.

For example, Hokstad Consulting integrates compliance checks directly into CI/CD pipelines, helping clients meet regulatory requirements while also cutting operational costs.

Jon Lucas, Director and Co-Founder of Hyve Managed Hosting, offers an insightful perspective:

As the cost of compliance continues to outweigh the cost of maintaining outdated or non-compliant infrastructure, it's time to reframe the conversation. Rather than focusing only on the risks, SMEs need to start seeing compliance as a way of building competitive advantage and a means of driving new opportunities, rather than something that creates more obstacles [33].

Treat compliance violations as critical risks. Work closely with vendors to address them, establish clear risk thresholds, and maintain open lines of communication. Always have contingency plans in place to minimise disruptions. After evaluating the data against best practices and your organisation’s risk tolerance, decide whether to move forward with the vendor.

As regulations continue to change, staying flexible is essential. Gartner predicts that by 2028, cloud platforms will be indispensable for most businesses [35], highlighting the growing importance of thorough vendor evaluation processes.

FAQs