HONG KONG GUIDANCE ON COMPLYING WITH...
Transcript of HONG KONG GUIDANCE ON COMPLYING WITH...
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HONG KONG
GUIDANCE ON COMPLYING WITH REGULATORY REQUIREMENTS APPLICABLE TO
BANKS USING DYNAMICS 365
Last updated: 1 August 2017
1. WHAT DOES THIS MICROSOFT GUIDANCE CONTAIN?
This guidance document provides a guide to complying with the regulatory process and requirements applicable to banks in Hong Kong (“FSI”) using
Dynamics 3651. Note that insurance companies are subject to separate regulation in Hong Kong. Microsoft has prepared a guidance document for
insurance companies which is available on request.
Sections 2 to 6 of this guidance sets out information about the regulatory process and the regulations that apply.
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 legal or regulatory requirement to complete a checklist like this one, we have received feedback from FSIs 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.
1 Note that this document is not intended as legal or regulatory advice and does not constitute any warranty or contractual commitment on the part of Microsoft or its affiliates. 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. If you have any questions, please do not hesitate to get in touch with your Microsoft contact.
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Appendix One also contains a list of the mandatory contractual requirements required by relevant regulation.
2. WHAT LAWS, REGULATIONS AND GUIDANCE ARE RELEVANT?
There are two key regulatory documents that HKMA has developed and publicly distributed in this area:
• HKMA’s Guidelines on Outsourcing (“Guidelines on Outsourcing”) at http://www.hkma.gov.hk/media/eng/doc/key-functions/banking-
stability/supervisory-policy-manual/SA-2.pdf; and
• HKMA’s General Principles for Technology Risk Management (“Technology Risk Principles”) at http://www.hkma.gov.hk/media/eng/doc/key-
functions/banking-stability/supervisory-policy-manual/TM-G-1.pdf.
(collectively “Publicly Available Documents”)
There are also guidelines and documents issued by the HKMA to and accessible only by the FSIs in this area. Due to the nature of these materials, they
are not covered by this guidance document.
3. WHO IS/ARE THE RELEVANT REGULATORS(S)?
The Hong Kong Monetary Authority (“HKMA”)
4. IS REGULATORY APPROVAL REQUIRED IN HONG KONG?
No.
Under the Publicly Available Documents, the HKMA does not require FSIs to obtain prior approval before engaging service providers to provide cloud
services.
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5. IS/ARE THERE (A) SPECIFIC FORM OR QUESTIONNAIRE(S) TO BE COMPLETED?
No. Under the Publicly Available Documents, there are no specific forms or questionnaires that an FSI must complete when considering cloud computing
solutions.
6. DOES THE REGULATOR MANDATE SPECIFIC CONTRACTUAL REQUIREMENTS THAT MUST BE ADOPTED?
Yes.
These are not set out by HKMA in a comprehensive list but the Guidelines on Outsourcing and Technology Risk Principles do contain certain provisions
which HKMA states should be set out in the FSI’s agreement with its service provider. Appendix One contains a comprehensive list and details of where
in the Microsoft contractual documents these points are covered.
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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. The suggested responses may provide sufficient detail but if you require further information, Microsoft will be happy to provide this
if you get in touch with your Microsoft contact. 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 Templates response and guidance
A. OVERVIEW
1. Who is the proposed Service Provider? 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. How would cloud computing be
implemented in your organization?
Through adoption of Microsoft Dynamics 365 product, a remotely hosted customer relationship
management (CRM) solution managed by Microsoft which is described in more detail here:
https://www.microsoft.com/en-us/dynamics365/home. Details of our proposed activities and operations
are listed in our response to Q3 below.
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3.
List all proposed activities and operations to
be outsourced to the Service Provider.
Service(s) to be outsourced Critical (Y/N)
1. Customer Relationship Management Solution Y
Microsoft Dynamics 365 is a remotely hosted customer relationship management (CRM) solution
managed by Microsoft and offering the following capabilities:
• Marketing—flexible segmentation tools, simplified campaign management, intuitive response
tracking, and insightful analytics.
• Sales—full lead to cash visibility, lead and opportunity tracking, streamlined approvals, and real-
time sales forecasts.
• Field Service—simplified case management, streamlined escalations, improved knowledge
sharing, and more effective account management.
• Project
• Operations
• Dynamics Business Platform—a flexible framework that helps organizations to extend and build
custom business applications and industry solutions known as the Business Application Platform.
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Microsoft Dynamics CRM Online delivers flexibility and business fit, combined with familiar user
experiences through deep stack alignment with the Microsoft Office productivity suite, namely Microsoft
Outlook, Microsoft Excel, and Microsoft Word. It also works well with other Microsoft technologies such
as Microsoft SQL Server® database software, Microsoft Communications Server, Microsoft BizTalk®
Server, Microsoft Exchange Server, and Microsoft SharePoint® Server.
4. What data will be processed by the service
provider on behalf of the FSI?
When you choose a Microsoft Dynamics 365 solution the types of data impacted are within your control
so the template response will need to be tailored depending on what data you have selected is relevant
to the solution.
We ensure that all data (but in particular any customer data) is treated with the highest level of security
in accordance with good industry practice to ensure that we and our service provider comply with our
legal and regulatory obligations and our commitments to customers. We only collect and process data
that is necessary for our business operations in compliance with all applicable laws and regulation and
this applies whether we process the data on our own systems or via a cloud solution such as Microsoft
Dynamics 365. Typically, the types of data that would be processed and stored by the Dynamics 365
service may include:
• Customer data (including customer name, contact details, account information, payment card data,
security credentials and correspondence).
• Employee data (including employee name, contact details, internal and external correspondence by
email and other means and personal information relating to their employment with the organization).
• Transaction data (data relating to transactions in which the organization is involved).
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• Indices (for example, market feeds).
• Other personal and non-personal data relating to the organization’s business operations as a FSI.
B. ACCOUNTABILITY
5. In any outsourcing arrangement, the Board
of Directors and management of FSIs
should retain ultimate accountability for the
outsourced activity.
Paragraph 2.1.1, Guidelines on Outsourcing (Accountability).
We would also suggest including a list, setting out the position of the key people involved in the selection
and any decision-making and approvals processes used.
Management in our organization has been involved throughout to ensure that the project aligns with our
organization’s overall business and strategic objectives. At the center of our objectives are of course
legal and regulatory compliance and customer satisfaction and these were the key objectives that
management had in mind when it considered this project. We are satisfied that this solution will ensure
legal and regulatory compliance because of the key features (including the security and regulator’s audit
rights) forming part of the Dynamics 365 service. We are also satisfied that customer satisfaction will be
maintained because we believe that Dynamics 365 will actually have some major benefits for our IT
operations and, accordingly, improve the overall service that we are able to provide to customers.
6. Outsourcing can allow management to
transfer their day-to-day managerial
responsibility, but not accountability, for an
activity or a function to a service provider.
FSIs should therefore continue to retain
ultimate control of the outsourced activity.
Paragraph 2.1.1, Guidelines in Outsourcing (Accountability).
The handing over of certain day to day responsibility to an outsourcing provider does present some
challenges in relation to control. 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
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remedies. At a practical level, we have selected the Dynamics 365 product since it provides us with
control over data location, authentication and advanced encryption controls. 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 Dynamics 365 services.
C. RISK ASSESSMENT
7. The Board of Directors and management of
FSIs should ensure that the proposed
outsourcing arrangement has been subject
to a comprehensive risk assessment (in
respect of operational, legal and reputation
risks) and that all the risks identified have
been adequately addressed before launch.
Paragraph 2.2.1, Guidelines on Outsourcing (Risk Assessment).
Clearly the HKMA expects that your organization would have carried out a risk assessment. In summary,
this would need to include:
• risk identification;
• analysis and quantification of the potential impact and consequences of these risks;
• risk mitigation and control strategy; and
• ongoing risk monitoring and reporting.
Ideally this should also include all of the items listed in the next section (8). If you have any questions
when putting together a risk assessment, please do not hesitate to get in touch with your Microsoft
contact.
Yes, led by our management we have carried out a thorough risk assessment of the move to Dynamics
365. This risk assessment included:
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• [ ];
• [ ]; and
• [ ].
[A copy of the risk assessment can be provided to the HKMA upon request.]
8. Specifically, the risk assessment should
cover inter alia the following:
a. the importance and criticality of the
services to be outsourced;
Paragraph 2.2.1, Guidelines on Outsourcing (Risk Assessment). You will need to take a view on the
criticality of the applications concerned. Below set out sample response involving critical workload. If the
workload is not critical, appropriate adjustments should be made.
Yes.
The risk assessment covered this.
We acknowledge that the services to be outsourced are critical to our “business-as-usual” activities and
that disruption would have a material impact on our organization.
We have managed this risk through:
• our choice of service provider, which was itself the result of a formal selection process that
amongst other things covered its [competence and track record, financial services credentials,
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hiring and screening processes, financial and parent company strength, inputs from its
customers and its approach to continuity planning];
• the controls we have in place to manage our relationship with the service provider (for example,
our contractual agreement, service levels and the rights of audit and inspection that we have in
place); and
• our own internal controls should an issue arise (for example, our disaster recovery planning
process).
b. Reasons for the outsourcing (e.g.
cost and benefit analysis); and
Paragraph 2.2.1, Guidelines on Outsourcing (Risk Assessment).
Yes.
The risk assessment covered this.
Specifically, we have chosen to use Microsoft Dynamics 365 for these services because we believe that
it will deliver benefits in terms of operating costs, service standard and security, and these requirements
were central to our selection process.
c. the impact on the FSI’s risk profile
(in respect of operational, legal and
reputation risks) of the outsourcing.
Paragraph 2.2.1, Guidelines on Outsourcing (Risk Assessment).
Yes, the risk assessment covered this.
• Operational risk: We managed this through our choice of service provider (see for example,
question 13), the controls we have in place to manage our relationship with the service provider
(for example, our contractual agreement, service levels, access to a Microsoft technical account
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manager and the regulator rights of audit and inspection that we have in place) and our own
internal controls (for example, our business continuity and disaster recovery plans).
• Legal risk: We have in place with Microsoft a legally-binding agreement regarding our respective
roles and responsibilities in respect of the outsourcing. We chose Microsoft for this project
because we believe it can help us to comply with our legal obligations – for example, the fact that
Microsoft permits data audits by regulators was a key advantage over other cloud solutions that
we considered.
• Reputational risk: We chose Microsoft because of its reputation in this sector. It is an industry
leader in cloud computing. Dynamics 365 is built based on ISO 27001, a rigorous set of global
standards covering physical, logical, process and management controls.
9. After FSIs implement an outsourcing plan,
they should regularly re-perform this
assessment.
Paragraph 2.2.2, Guidelines on Outsourcing (Risk Assessment). The Guidelines do not specify exactly
how often this needs to be done but the HKMA may wish to know how often you plan to re-perform the
assessment (e.g. annually may be a good suggestion and/or whenever any material changes occur).
D. ABILITY OF THE SERVICE PROVIDER
10. Before selecting a service provider FSIs
should perform appropriate due diligence.
Paragraph 2.3 (Ability of Service Providers), Guidelines on Outsourcing (Risk Assessment). See question
13 below for detail regarding the specific issues that HKMA considers should be taken into account.
We have undertaken a thorough due diligence of Microsoft’s processes and procedures in relation to
Dynamics 365.
As part of Microsoft’s certification requirements, they are required to undergo regular independent third
party auditing and Microsoft shares with us the independent third party audit reports. Microsoft also
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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 up-front and on-going assessment of
Microsoft’s ability to meet our policy, procedural, security control and regulatory requirements.
11. In case of outsourcing of critical technology
services (e.g. data center operations), FSIs
are expected to commission a detailed
assessment of the technology service
provider’s IT control environment. The
assessment should ideally be conducted by
a party independent of the service provider.
The independent assessment report should
set out clearly the objectives, scope and
results of the assessment and should be
provided to the HKMA for reference.
Paragraph 7.1.1, Technology Risk Principles (Management of Technology Outsourcing) which sets out
some additional controls that FSIs should take into account.
We have not had cause to commission an independent assessment since numerous independent
assessments of Microsoft’s IT control environment have already been carried out.
By way of example, Microsoft is certified for ISO 27001, which offers very high security benchmarks
available across the world.
12. FSIs should conduct an annual assessment
to confirm the adequacy of the IT control
environment of the provider of critical
technology services.
Paragraph 7.1.1, Technology Risk Principles (Management of Technology Outsourcing).
The HKMA expects that you repeat your assessment of the adequacy of the Dynamics 365 solution at
least once a year. If you require any input from Microsoft, please do not hesitate to get in touch with your
Microsoft contact.
13. In assessing a provider, apart from the cost
factor and quality of services FSIs should
take into account the provider’s (a) financial
soundness, (b) reputation, (c) managerial
skills, (d) technical capabilities, (e)
Paragraph 2.3.1, Guidelines on Outsourcing (Ability of Service Providers) which lists these specific
considerations.
(a) Financial Soundness: 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
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operational capability and capacity, (f)
compatibility with the FSI’s corporate
culture and future development strategies,
(g) familiarity with the banking industry and
(h) capacity to keep pace with innovation in
the market.
indicate its strong financial position. Accordingly, we have no concerns regarding its financial
strength.
(b) Reputation: Microsoft is an industry leader in cloud computing. Dynamics 365 is built based on ISO
27001, a rigorous set of global standards covering physical, logical, process and management
controls. Dynamics 365 is used by many of the world’s top brands. Some case studies are available
on the Microsoft website at https://customers.microsoft.com/en-us.
(c) Managerial skills: The fact that Microsoft already manages these services for financial institutions
in leading markets around the world and that it has achieved an ISO 27001 accreditation (which,
amongst other things, assesses management controls) gives us confidence that it has the necessary
managerial skills.
(d) Technical capabilities: Microsoft’s ISO 27001 accreditation confirms that it has the technical
capability required for the service.
(e) Operational capability and capacity: Microsoft has demonstrated its operational capability through
its reputation (see above) and its ISO accreditations and we have no concerns as to its operational
capacity as it is one of the largest providers of cloud computing services in the world.
(f) Compatibility with the FSI’s corporate culture and future development strategies: We are
confident that the use of Dynamics 365 will align well with our corporate culture and the fact that the
service is scalable (i.e. it can be expanded or reduced to meet our demand) means that it is
compatible with our future development strategy.
(g) Familiarity with the banking industry: 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
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many Microsoft cloud-based solutions can meet their respective regulatory requirements. This gives
us confidence that the service provider is able to help meet the high burden of financial services
regulation and is experienced in meeting and understanding these requirements.
(h) Capacity to keep pace with innovation in the market: Microsoft has the financial, operational and
managerial capacity to lead innovation in the cloud computing market and it has demonstrated this
to date.
14. Technology service providers should have
sufficient resources and expertise to
comply with the substance of the FSI’s IT
control policies.
Paragraph 7.1.1, Technology Risk Principles (Management of Technology Outsourcing).
Yes. We are confident that Microsoft has sufficient resources and expertise to comply with the substance
of our requirements. In particular, we considered the following:
a. Competence and experience. Microsoft is an industry leader in cloud computing. Dynamics 365 is
built based on ISO 27001, a rigorous set of global standards covering physical, logical, process and
management controls.
b. Past track-record. Dynamics 365 is used by many of the top brands around the world. We consulted
various case studies relating to Dynamics 365, which are available on the Microsoft website at
https://customers.microsoft.com/en-us and also considered the fact that Microsoft has amongst its
customers some of the world’s largest organizations and financial institutions.
c. Specific financial services credentials. 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 many Microsoft cloud-based solutions can meet their respective regulatory requirements. This
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gives us confidence that Microsoft is able to help meet the high burden of financial services regulation
and is experienced in meeting these requirements.
d. Microsoft’s staff hiring and screening process. 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.
e. Financial strength of Microsoft. 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 its strong financial position. Accordingly, we have no concerns regarding its
financial strength.
f. Business resumption and contingency plan. Microsoft offers contractually-guaranteed 99.5% to
99.9% (depending on the specific solution involved) 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.
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g. Security and internal controls, audit, reporting and monitoring. 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 27001 certification,
Dynamics 365 is designed for security with encryption features. Customer data in Dynamics 365
exists in two states, namely at rest on storage media and 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. Dynamics 365 also transports and
stores S/MIME (as defined above) messages. Dynamics 365 will transport and store messages that
are encrypted using client-side, third-party encryption solutions such as PGP. Microsoft Dynamics
365 uses standard Microsoft SQL Server cell level encryption for a set of default entity attributes that
contain sensitive information, such as user names and email passwords. This feature can help meet
compliance requirements associated with FIPS 140-2. Field-level data encryption is especially
important in scenarios that leverage the Microsoft Dynamics CRM Email Router, which must store
user names and passwords to enable integration between a Dynamics 365 instance and an email
service such as Microsoft Exchange. Additionally, Field-level data encryption is also supported for
specific system entity attributes. For more information about Field-level data encryption, see:
https://msdn.microsoft.com/en-us/library/dn481562.aspx.
15. FSIs should try to avoid placing excessive
reliance on a single outside service provider
in providing critical technology services.
Paragraph 7.1.1, Technology Risk Principles (Management of Technology Outsourcing). You may also
want to provide details of any other suppliers you use or intend to use.
To ensure control, transparency and consistency, it is necessary for the applications and services forming
part of Dynamics 365 to be provided by one provider (i.e. Microsoft). Because of the due diligence and
risk management processes we have implemented we are of the view that use of Dynamics 365 would
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not represent an excessive reliance on one service provider. The terms of our contract with Microsoft
does not limit our right to move to another provider (or to revert to a local, non-cloud based offering)
should we choose to do so.
E. OUTSOURCING AGREEMENT
Note: See also Appendix One of this guidance document for a comprehensive list of the contractual terms that HKMA mandates should be included
in the outsourcing agreement and how these are addressed by the Microsoft contractual documents.
16. The type and level of services to be
provided and the contractual liabilities and
obligations of the service provider should
be clearly set out in a service agreement
between FSIs and their service provider.
Paragraph 2.4.1, Guidelines on Outsourcing (Outsourcing Agreement).
Yes.
Microsoft’s Service Level Agreement (“SLA”) and its Business and Services Agreement (“MBSA”) apply
to the Dynamics 365 service. Amongst other things, they provide details of the contractual liabilities and
obligations of Microsoft, one of which is a contractual 99.5% to 99.9% uptime guarantee (depending on
the specific solution involved) for the Dynamics 365 product.
Please find a copy of the SLA at:
https://www.microsoft.com/en-us/Licensing/product-licensing/products.aspx
MBSA is available upon request.
17. FSIs should regularly (e.g. annually) review
their outsourcing agreements. They should
assess whether the agreements should be
renegotiated and renewed to bring them in
Paragraph 2.4.2, Guidelines on Outsourcing (Outsourcing Agreement).
The HKMA seems to expect that you review your arrangements at least once per year. If you require any
input from Microsoft, please do not hesitate to get in touch with your Microsoft contact.
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line with current market standards and to
cope with changes in their business
strategies.
18. The outsourcing agreement should specify
clearly, among other things, the
performance standards and other
obligations of the technology service
provider, and the issue of software and
hardware ownership.
Paragraph 7.1.1, Technology Risk Principles (Management of Technology Outsourcing).
Yes.
Microsoft’s SLA and the MBSA specify clearly the performance standards of Microsoft (for example, a
99.5% to 99.9% uptime depending on the specific solution involved) and other obligations of Microsoft
(for example, its obligations to provide access in the event of an audit/inspection). It also covers clearly
the issue of software and hardware ownership (the software and hardware are both owned by Microsoft
but use of the software and hardware are licensed to us as users of the Dynamics 365 service).
19. As technology service providers may
further sub-contract their services to other
parties, FSIs should consider including a
notification or an approval requirement for
significant sub-contracting of services and a
provision that the original technology
service provider is still responsible for its
sub-contracted services.
Paragraph 7.1.1, Technology Risk Principles (Management of Technology Outsourcing).
Microsoft is permitted to hire subcontractors under the Online Services Terms (“OST”). Microsoft
maintains a list of authorized subcontractors for Dynamics 365 that have access to our data and provides
us with a mechanism to obtain notice of any updates to that list. The actual list can be accessed via
https://www.microsoft.com/en-us/trustcenter/Privacy/Who-can-access-your-data-and-on-what-
terms#subcontractors. Contractually, if we do not approve of a subcontractor that will be given access to
our data to be added to the list, we are entitled to terminate our subscription to the Dynamics 365 services.
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,
and that Microsoft remains contractually responsible (and therefore liable) for its subcontractors’
compliance with Microsoft’s obligations in the OST. In addition, Microsoft’s commitment to ISO 27001
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and ISO 27018 requires Microsoft to ensure that its subcontractors are subject to the same security
controls as Microsoft is subject to.
F. CUSTOMER DATA CONFIDENTIALITY
20. FSIs should ensure that the proposed
outsourcing arrangement complies with
relevant statutory requirements (e.g. the
Personal Data (Privacy) Ordinance -
PDPO) and common law customer
confidentiality. This will generally involve
seeking legal advice.
Paragraph 2.5.1, Guidelines on Outsourcing (Customer Data Confidentiality).
Microsoft recommends that you do seek legal advice on the use of cloud computing services in relation
to statutory/regulatory/common law requirements.
We are confident that the proposed use of Dynamics 365 complies with relevant statutory requirements,
including the PDPO and common law confidentiality requirements.
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 data centers of even the most sophisticated organizations.
In relation to the PDPO, Dynamics 365 includes the following features and commitments from Microsoft
to ensure compliance with the requirements of the PDPO: (i) Microsoft will not use our data for other
purposes other than providing the services; (ii) Microsoft has security policies and controls and security
measures which are verified by independent auditors. These measures include security features on its
hardware, software and physical data center, restricted physical data center access, Dynamics 365 is
ISO 27001 and ISO 27018 compliant and data is encrypted both at rest and via the network as it is
transmitted between data center and a user; (iii) Microsoft will inform us promptly if our data has been
accessed improperly; (iv) there are specific data retention and deletion commitments in the OST
governing handling of our data at the end of the service term.
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Microsoft commits to comply with ISO 27018. In February 2015, Microsoft became the first major cloud
provider to adopt the world’s first international standard for cloud privacy, ISO 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 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 27018 match
the protections required by the PDPO. For more information on this, follow this link.
In choosing Microsoft, we also took into account the fact that Microsoft offers access and regulatory audit
rights, thereby allowing us to comply with our regulatory obligations in this respect.
21. FSIs should have controls in place to
ensure that the requirements of customer
data confidentiality are observed and
proper safeguards are established to
protect the integrity and confidentiality of
customer information. Typical safeguards
include, among other things:
• undertakings by the service
provider that the company and its
staff will abide by confidentiality
rules, including taking account of
the data protection principles set
out in PDPO;
Paragraph 2.5.2, Guidelines on Outsourcing (Customer Data Confidentiality).
Microsoft recommends that you seek legal advice as to PDPO requirements.
As above, 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 data centers of even the most sophisticated
organizations. Dynamics 365 is built based on ISO 27001, a rigorous set of global standards covering
physical, logical, process and management controls.
Regarding the specific safeguards referred to in the HKMA Supervisory Policy Manual:
• Undertakings by the service provider that the company and its staff will abide by
confidentiality rules, including taking account of the data protection principles set out in
PDPO: Yes. We have contractual confidentiality terms in our agreements with Microsoft.
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• FSIs' contractual rights to take
action against the service provider
in the event of a breach of
confidentiality;
• segregation or
compartmentalization of FSIs'
customer data from those of the
service provider and its other
clients; and
• access rights to FSIs' data
delegated to authorize employees
of the service provider on a need
basis.
• FSIs' contractual rights to take action against the service provider in the event of a breach
of confidentiality: Yes. Under our contractual terms with Microsoft, we would expect to have a
breach of contract claim in this situation.
• Segregation or compartmentalization of FSIs' customer data from those of the service
provider and its other clients: Yes. Data storage and processing is segregated through Active
Directory structure and capabilities specifically developed to help build, manage, and secure
multi-tenant environments. 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 other parties. Microsoft also provide us with our own database to maximize the
security and integrity of our data. This safeguards a customer’s data so that the data cannot be
accessed or compromised by co-tenants.
Select the following text if using Dynamics 365 dedicated version:
We have secured an offering that provides for a dedicated hosted offering, which means that our
data is hosted on hardware dedicated to us.
• Access rights to FSIs' data delegated to authorize employees of the service provider on a
need basis: Yes. Microsoft applies strict controls over which personnel roles and personnel will
be granted access to customer data. Personnel access to the IT systems that store customer
data is strictly controlled via role-based access control (“RBAC”) and lock box processes.
Access control is an automated process that follows the separation of duties principle and the
principle of granting least privilege. This process ensures that the engineer requesting access to
these IT systems has met the eligibility requirements, such as a background screen,
fingerprinting, required security training and access approvals. In addition, the access levels are
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reviewed on a periodic basis to ensure that only users who have appropriate business
justification have access to the systems.
22. FSIs should notify their customers in
general terms of the possibility that their
data may be outsourced. They should also
give specific notice to customers of
significant outsourcing initiatives,
particularly where the outsourcing is to an
overseas jurisdiction.
Paragraph 2.5.3, Guidelines on Outsourcing (Customer Data Confidentiality).
Where you have existing outsourcing arrangements in place you would already have such notifications
in place. If so, contracting for Dynamics 365 should not require additional notifications. Microsoft
recommends that you seek legal advice on your privacy policies and consent mechanisms to ensure that
they do comply with applicable law. If you require any information from Microsoft please do get in touch
with your Microsoft contact.
23. In the event of a termination of outsourcing
agreement, for whatever reason, FSIs
should ensure that all customer data is
either retrieved from the service provider or
destroyed.
Paragraph 2.5.4, Guidelines on Outsourcing (Customer Data Confidentiality).
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. Secure disposal or re-use of
equipment and disposal of media is covered under the ISO 27001 against which Microsoft is certified.
G. CONTROL OVER OUTSOURCED ACTIVITIES
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24. FSIs should have controls in place (e.g.
comparison with target service level) to
monitor the performance of service
providers on a continuous basis.
FSIs should ensure that they have effective
procedures for monitoring the performance
of, and managing the relationship with, the
service provider and the risks associated
with the outsourced activity.
Such monitoring should cover, inter alia:
• contract performance;
• material problems encountered by
the service provider; and
• regular review of the service
provider’s financial condition and
risk profile and the service
provider’s contingency plan, the
results of testing thereof and the
scope for improving it.
Paragraphs 2.3.2, Guidelines on Outsourcing (Ability of Service Providers) and paragraphs 2.6.1 and
2.6.2 (Control over Outsourced Activities) for the detailed areas that the monitoring should cover. You
may also in this context wish to refer to any internal monitoring procedures you are putting in place.
Yes. Microsoft’s SLA applies to the Dynamics 365 product. Our IT administrators also have access to the
Dynamics 365 Service Health Dashboard, which provides real-time and continuous monitoring of the
Dynamics 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 99.5% to 99.9% (depending on the specific solution
involved) uptime guarantee for the Dynamics 365 product and covers performance monitoring and
reporting requirements which enable us to monitor Microsoft’s performance on a continuous basis against
service levels.
Please find a copy of the SLA at:
https://www.microsoft.com/en-us/Licensing/product-licensing/products.aspx
25. Responsibility for monitoring the service
provider and the outsourced activity should
Paragraph 2.6.3 (Control over Outsourced Activities), Guidelines on Outsourcing.
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be assigned to staff with appropriate
expertise.
If requested by HKMA, Microsoft would suggest that you provide details of the relevant personnel and a
brief summary of their experience.
26. FSIs should establish reporting procedures
which can promptly escalate problems
relating to the outsourced activity to the
attention of the management of the FSI and
their service providers.
Paragraph 2.6.4 (Control over Outsourced Activities), Guidelines on Outsourcing.
Service Provider Escalation
As part of the support we receive from Microsoft we 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.
Internal escalation
[ ] You will need to describe your process for how any issues will be escalated internally.
27. The control procedures over the
outsourcing arrangement should be subject
to regular reviews by the Internal Audit.
Paragraph 2.6.5 (Control over Outsourced Activities), Guidelines on Outsourcing.
The HKMA expects that your internal audit function would regularly review the outsourcing arrangement
so you will need to confirm this.
H. CONTINGENCY PLANNING
28. FSIs should develop a contingency plan for
critical outsourced technology services to
Paragraph 7.1.1 (Management of Technology Outsourcing), Technology Risk Principles.
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protect them from unavailability of services
due to unexpected problems of the
technology service provider. This may
include an exit management plan and
identification of additional or alternate
technology service providers for such
support and services.
The HKMA clearly expects you to have a contingency plan in place, covering disaster recovery/business
continuity. This would usually include:
• performing a business impact analysis of a disaster situation;
• considering the internal mechanisms to deal with such a situation; and
• considering Dynamics 365’s own disaster recovery and business continuity safeguards.
The following outlines Dynamics 365’s own disaster recovery and business continuity safeguards:
Redundancy
• Physical redundancy at server, data center, and service levels.
• Data redundancy with robust failover capabilities.
• Functional redundancy with offline functionality.
• As an additional safeguard, Microsoft performs daily back-ups to a secure, offsite location.
Resiliency
• Active load balancing.
• Automated failover with human backup.
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• Recovery testing across failure domains.
Distributed Services
• Distributed component services 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.
• Simplified operations and deployment.
Monitoring
• Internal monitoring built to drive automatic recovery.
• Outside-in monitoring raises alerts about incidents.
• Extensive diagnostics provide logging, auditing, and granular tracing.
Simplification
• Standardized hardware reduces issue isolation complexities.
• Fully automated deployment models.
• 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.
• Continuous improvement by learning from the on-call teams.
Continuous learning
• If an incident occurs, Microsoft does a thorough post-incident review every time.
• Microsoft’s post-incident review consists of analysis of what happened, Microsoft’s response,
and Microsoft’s plan to prevent it in the future.
• In the event the organization was affected by a service incident, Microsoft shares the post-
incident review with the organization.
29. Contingency plans should be maintained
and regularly tested by FSIs and their
service providers to ensure business
continuity, e.g. in the event of a breakdown
in the systems of the service provider or
telecommunication problems with the host
country.
Paragraph 2.7.1 (Contingency Planning), Guidelines on Outsourcing.
Microsoft carries out disaster recovery testing at least once per year. Please see also question 28 above
for a summary of the disaster recovery/business continuity safeguards provided as part of the Dynamics
365 service.
30. Contingency arrangements in respect of
daily operational and systems problems
Paragraph 2.7.2 (Contingency Planning), Guidelines on Outsourcing.
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would normally be covered in the service
provider’s own contingency plan. FSIs
should ensure that they have an adequate
understanding of their service provider’s
contingency plan and consider the
implications for their own contingency
planning in the event that an outsourced
service is interrupted due to failure of the
service provider’s system.
The HKMA requirements indicate the importance of you understanding the disaster recovery/business
continuity safeguards forming part of Dynamics 365. As such, if you have any questions about these,
please do not hesitate to get in touch with your Microsoft contact.
Please see question 28 above for a summary of the disaster recovery / business continuity safeguards
provided as part of the Dynamics 365 service.
31. In establishing a viable contingency plan,
FSIs should consider, among other things,
the availability of alternative service
providers or the possibility of bringing the
outsourced activity back in-house in an
emergency, and the costs, time and
resources that would be involved.
Paragraph 2.7.3 (Contingency Planning), Guidelines on Outsourcing.
The HKMA clearly expects you to have a plan in place if you did decide to stop using the Dynamics 365
service.
To ensure control, transparency and consistency, it is necessary for the applications and services forming
part of Dynamics 365 to be provided by one provider (i.e. Microsoft). Because of the due diligence and
risk management processes we have implemented we are of the view that use of Dynamics 365 would
not represent an excessive reliance on service provider. The terms of our contract with Microsoft does
not limit our right to move to another provider (or to revert to a local, non-cloud based offering) should we
choose to do so.
I. ACCESS TO OUTSOURCED DATA
32. FSIs should ensure that appropriate up-to-
date records are maintained in their
premises and kept available for inspection
Paragraphs 2.8.1 and 2.8.2 (Access to Outsourced Data), Guidelines on Outsourcing.
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by the HKMA in accordance with §§55 and
56 of the Banking Ordinance and that data
retrieved from the service providers are
accurate and available in Hong Kong on a
timely basis.
Access to data by the HKMA’s examiners
and the FSI’s internal and external auditors
should not be impeded by the outsourcing.
FSIs should ensure that the outsourcing
agreement with the service provider
contains a clause which allows for
supervisory inspection or review of the
operations and controls of the service
provider as they relate to the outsourced
activity.
The terms of our contract with Microsoft provide that if a regulator requests, Microsoft will provide the
regulator a direct right to examine the relevant service, including the ability to conduct an on-premise
examination; to meet with Microsoft personnel and Microsoft’s external auditors; and to access related
information, records, reports and documents. Customer will at all times have access to its data using the
standard features of Dynamics 365, and may delegate its access to its data to representatives of the
HKMA.
J. ADDITIONAL CONCERNS IN RELATION TO OVERSEAS OUTSOURCING
33. Implications of the overseas outsourcing for
FSIs' risk profile - FSIs should understand
the risks arising from overseas outsourcing,
taking into account relevant aspects of an
overseas country (e.g. legal system,
regulatory regime, sophistication of
technology, infrastructure).
Paragraph 2.9.1 (Additional Concerns in Relation to Overseas Outsourcing), Guidelines on Outsourcing.
The answer to this question will depend on the region you are in. You may discuss this with your Microsoft
contact. Microsoft enables customers to select the region that it is provisioned from.
Dynamics 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.
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a. Political (i.e. cross-broader conflict, political unrest etc). Dynamics 365 offers data-location
transparency so that the organizations and regulators are informed of the jurisdiction(s) in which data
is hosted. We are confident that Microsoft’s data center locations offer stable political environments.
b. Country/socioeconomic. Dynamics 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 stable socioeconomic environments.
c. Infrastructure/security/terrorism. Microsoft’s data centers are built to exacting standards,
designed to protect customer data from harm and unauthorized access. Data center access is
restricted 24 hours per day by job function so that only essential personnel have access. 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. The data centers are monitored using motion sensors, video surveillance and
security breach alarms.
d. Environmental (i.e. earthquakes, typhoons, floods). Environmental controls have been
implemented to protect the data centers including temperature control, heating, ventilation and air-
conditioning, fire detection and suppression systems and power management systems, 24-hour
monitored physical hardware and seismically-braced racks. Microsoft Data centers are built in
seismically safe zones. These requirements are covered by Microsoft’s ISO 27001 accreditation for
Dynamics 365.
34. Right of access to customers’ data by
overseas authorities such as the police and
tax authorities. FSIs should generally obtain
Paragraph 2.9.2 (Additional Concerns in Relation to Overseas Outsourcing), Guidelines on Outsourcing.
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a legal opinion from an international or other
reputable legal firm in the relevant
jurisdiction on this matter. This will enable
them to be informed of the extent and the
authorities to which they are legally bound
to provide information. Right of access by
such parties may be unavoidable due to
compulsion of law. FSIs should therefore
conduct a risk assessment to evaluate the
extent and possibility of such access taking
place. FSIs should notify the HKMA if
overseas authorities seek access to their
customers’ data. If such access seems
unwarranted the HKMA reserves the right
to require the FSI to take steps to make
alternative arrangements for the
outsourced activity.
The answer to this question will partly depend on the region you are in. You may discuss this with your
Microsoft contact. Microsoft enables customers to select the region that it is provisioned from, and adopts
strict processes in dealing with disclosure requests by third parties and authorities. Microsoft
recommends that you obtain a legal opinion from an international or other reputable legal firm in the
country where your data will be hosted on this matter.
Microsoft is transparent in relation to the location of our data. Dynamics 365 is hosted out of […..].
This/These location(s) has/have been thoroughly vetted and the circumstances in which the authorities
may have rights to access customer information are not considered unwarranted. Microsoft data center
locations are made public on the Microsoft Trust Center at https://www.microsoft.com/en-us/trustcenter.
Microsoft also provides contractual commitment on how data disclosure requests from authorities will be
handled. Microsoft will not disclose our data to law enforcement unless required by law. If law
enforcement contacts Microsoft with a demand for our data, Microsoft will attempt to redirect the law
enforcement agency to request that data directly from us. If compelled to disclose our data to law
enforcement, Microsoft will promptly notify us and provide a copy of the demand unless legally prohibited
from doing so. Over the past years, Microsoft has taken multiple court actions to challenge different law
enforcement data disclosure requests and has, through their action, established a track record and
demonstrated how they comply with their contractual commitment in this regard.
35. Notification to customers - FSIs should
generally notify their customers of the
country in which the service provider is
located (and of any subsequent changes)
and the right of access, if any, available to
the overseas authorities.
Paragraph 2.9.1 (Additional Concerns in Relation to Overseas Outsourcing), Guidelines on Outsourcing.
Microsoft recommends that you confirm in this section that you have informed customers where services
will be provided from (according to the specification of your final solution with Microsoft). Microsoft also
recommends that you confirm in this section that you have informed customers of the right of access
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available to overseas authorities (for example in Singapore, for the purpose of the Dynamics 365 service,
depending on the specification of your final solution with Microsoft).
36. Right of access to customers’ data for
examination by the HKMA after outsourcing
- FSIs should not outsource to a jurisdiction
which is inadequately regulated or which
has secrecy laws that may hamper access
to data by the HKMA or FSIs' external
auditors. They should ensure that the
HKMA has right of access to data. Such
right of access should be confirmed in
writing by both FSIs and their home or host
authorities, as the case may be.
Paragraph 2.9.1 (Additional Concerns in Relation to Overseas Outsourcing), Guidelines on Outsourcing.
Dynamics 365 is hosted out of […..]. This/These location(s) has/have been thoroughly vetted and as far
as we are aware, there are no secrecy laws which would hamper access to data in the appropriate
circumstances.
There are provisions in the contract that enable the HKMA to carry out inspection or examination of
Microsoft’s facilities, systems, processes and data relating to the services. This is set out FSA.
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, risk-threat evaluations and significant changes to the business resumption and
contingency plans.
37. §33 of the PDPO in respect of transfer of
personal data outside Hong Kong –
although §33 has not yet come into
operation, FSIs are advised to take account
of the provisions therein and the potential
impact on their plans in respect of overseas
outsourcing.
Paragraph 2.9.1 (Additional Concerns in Relation to Overseas Outsourcing), Guidelines on Outsourcing.
Section 33 of the PDPO, assuming it is in force, prohibits organizations from transferring data outside of
Hong Kong except in certain circumstances e.g. if the organization has taken all reasonable precaution
and exercised due diligence that personal data will not be handled in a manner in contravention of the
PDPO requirements (commonly referred to as the “Due Diligence Exception”). Putting in place an
enforceable contract between all parties to the transfer is a way to satisfy the Due Diligence Exception
and the Office of the Privacy Commission for Personal Data, Hong Kong (PCPD) has proposed a set of
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recommended model clauses to include in such contract. Microsoft's OST has in principle covered the
core areas of the recommended model clauses and should therefore satisfy the Due Diligence Exception.
38. Governing law of the outsourcing
agreement – the agreement should
preferably be governed by Hong Kong law.
Paragraph 2.9.1 (Additional Concerns in Relation to Overseas Outsourcing), Guidelines on Outsourcing.
The MBSA deals with what countries laws apply if there is a legal dispute.
The governing law is that of the State of Washington, U.S., however the parties have the ability to bring
proceedings in the locations as follows:
• If Microsoft brings the action, the jurisdiction will be where our contracting entity is located;
• If we bring the action, the jurisdiction will be the state of Washington; and
Both parties can seek injunctive relief with respect to a violation of intellectual property rights or
confidentiality obligations in any appropriate jurisdiction.
39. In case of a locally incorporated FSI, a
principal concern is the ability of the HKMA
to exercise its legal powers under the
Banking Ordinance effectively if there is
limited cooperation by the service provider.
Accordingly, where a local FSI is planning
to outsource, for example, a major part of
its data processing function to outside Hong
Kong, the HKMA will expect the FSI to have
a robust back-up system and contingency
Paragraph 2.9.2 (Additional Concerns in Relation to Overseas Outsourcing), Guidelines on Outsourcing.
The HKMA should have no concerns about limited cooperation by Microsoft as service provider. Microsoft
understands the role that the HKMA needs to play as regulator. There are provisions in the contract that
enable the HKMA to carry out inspection or examination of Microsoft’s facilities, systems, processes and
data relating to the services.
Microsoft provides back-up system and contingency plan in place – please see the response to questions
28 and 29 above.
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plan in an acceptable jurisdiction. The back-
up system should be properly documented
and regularly tested. It may be appropriate
for an independent opinion on its
effectiveness to be sought.
Microsoft carries out disaster recovery testing at least once per year.
An independent opinion on Microsoft’s effectiveness already exists by virtue of the fact that Dynamics
365 has an ISO 27001 accreditation, a rigorous set of global standards covering physical, logical, process
and management controls.
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APPENDIX ONE
MANDATORY CONTRACTUAL REQUIREMENTS
This table sets out the specific items that must be covered in the FSI’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
PT = Product Terms
SLA = Online Services Service Level Agreement
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1. The service agreement between FSIs and their service
provider should clearly set out:
• The type and level of services to be provided; and
• The contractual liabilities and obligations of the service
provider.
Paragraph 2.4.1, Guidelines on Outsourcing
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 PT and
OST. The services are described in more detail in OST, which includes a list of service
functionality in the Data Processing Terms section, and core features of the Dynamics
365 Services in the Online Service Specific Terms section. The MBSA addresses liability
and rights of action.
2. FSIs should have in place undertakings by the service provider
that the company and its staff will abide by confidentiality rules,
including taking into account the data protection principles set
out in the PDPO.
Paragraph 2.5.2, Guidelines on Outsourcing
The MBSA deals with confidentiality. 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.
The OST states, in the General Terms section, that Microsoft will comply with all laws
and regulations applicable to its provision of Dynamics 365 services, including security
breach notification law. Microsoft is not responsible for compliance with any laws or
regulations applicable to us, or the financial services industry, that are not generally
applicable to information technology service providers.
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Microsoft also makes specific commitments with respect to our data in the OST. In
summary Microsoft commits that:
1. Ownership of our data remains at all times with us.
2. Our data will only be used to provide the online services to us. Our data will not
be used for any other purposes, including for advertising or other commercial
purposes.
3. We retain the ability to access and extract our data at all material times. Except
for free trials, Microsoft will retain our data for 90 days after expiration or
termination of service, and will delete our data after the said retention period,
and in the case of Dynamics 365 services, such deletion will take place no later
than 180 days after expiration or termination or service.
4. Microsoft will not disclose our data to law enforcement unless it is legally obliged
to do so, and only after not being able to redirect the request to us.
5. Microsoft will implement and maintain appropriate technical and organizational
measures, internal controls, and information security routines intended to protect
our data against accidental, unauthorized or unlawful access, disclosure,
alteration, loss, or destruction.
6. Microsoft will notify us 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.
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3. FSIs should have contractual rights to take action against the
service provider in the event of a breach of confidentiality.
Paragraph 2.5.2, Guidelines on Outsourcing
Yes.
The MBSA deals with confidentiality. 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.
4. FSIs should ensure that the outsourcing agreement with the
service provider contains a clause which allows for supervisory
inspection or review of the operations and controls of the
service provider as they relate to the outsourced activity.
Paragraph 2.8.2, Guidelines on Outsourcing
Yes.
The OST specifies the audit 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, the FSA detail the examination and influence rights that are granted to us
and the HKMA. The FSA sets out a process which can culminate in the HKMA’s
examination of Microsoft’s premises, and gives us the opportunity to participate in the
Microsoft Online Services Customer Compliance Program, which is a for-fee program
that facilitates our 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
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impact Microsoft’s ability to provide the services, and (e) provide feedback on areas for
improvement in the services.
5. The outsourcing agreement should preferably be governed by
Hong Kong law.
Paragraph 2.9.1, Guidelines on Outsourcing
The MBSA deals with what countries laws apply if there is a legal dispute.
The governing law is that of the State of Washington, U.S., however the parties have the
ability to bring proceedings in the locations as follows:
• If Microsoft brings the action, the jurisdiction will be where our contracting entity is
located;
• If we bring the action, the jurisdiction will be the state of Washington; and
• Both parties can seek injunctive relief with respect to a violation of intellectual
property rights or confidentiality obligations in any appropriate jurisdiction.
6. The outsourcing agreement should specify clearly, among
other things, the performance standards and other obligations
of the technology service provider and the issue of software
and hardware ownership.
Paragraph 7.1.1, Technology Risk Principles
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 software and hardware are owned by Microsoft but licensed for use by us as a
service, as is standard in any cloud services solution.
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7. FSIs should consider including a notification or an approval
requirement for significant sub-contracting of services and a
provision that the original technology service provider is still
responsible for its sub-contracted services.
Paragraph 7.1.1, Technology Risk Principles
Yes.
The OST specifies that Microsoft is permitted to hire subcontractors. In the context of
Dynamics 365 services, the OST provides that Microsoft may hire subcontractors to
provide certain limited or ancillary services on its behalf.
Under the terms of the OST, 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. The actual list is published on the applicable
Microsoft Trust Center, and it sets out the identity of such subcontractors, their respective
location and the function(s) that they perform. If we do not approve of a subcontractor
that is added to the list, then we are entitled to terminate the affected online services.
The confidentiality of our data is protected when Microsoft uses subcontractors because
Microsoft commits that its subcontractors will be permitted to obtain our data only to
deliver the services Microsoft has retained them to provide and will be prohibited from
using our data for any other purpose.
Microsoft also 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.
Under the terms of the OST, Microsoft remains contractually responsible (and therefore
liable) for its subcontractors’ compliance with Microsoft’s obligations in the OST. In
addition, Microsoft’s commitment to ISO 27018, requires Microsoft to ensure that its
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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.