At the heart of many data security frameworks is the Hardware Security Module (HSM), which helps companies to ensure cryptographic keys are generated, used, and stored securely. The UK Hardware Security Modules market generated $106.1 million in revenue in 2024, and is expected to reach $259.4 million by 2030.
Because of rising incidents of cybercrime, the security of sensitive data for organisations is crucial. Secure cryptographic key management has become a priority for many, such as those in financial services, government institutions, and healthcare facilities. Here’s our guide to HSMs, how they work, and the benefits of implementing an HSM for your organisation.
What are Hardware Security Modules?
Hardware Security Modules (HSM) are a specialised, physical device designed to secure cryptographic processes by generating, protecting and managing the keys used in these operations. A HSM also has the ability to store cryptographic keys.
HSMs are tamper-resistant hardware devices with a robust Operating System (OS) and high-tech security features. It supports all major cryptographic tasks, including:
- Encryption and decryption.
- Authentication.
- Key management.
- Key exchange.
- Digital signing.
Often likened to digital vaults — in a similar vein to traditional bank vaults — HSMs play a crucial part in safeguarding an organisation’s sensitive data by ensuring cryptographic processes are carried out securely, and keys are protected from unauthorised access. HSMs are specially designed to resist tampering and ensure the confidentiality and integrity of its cryptographic keys.
Due to their secure, impenetrable design, these physical devices are commonly found in environments where large amounts of sensitive data is processed and tight security protocols are, therefore, necessary. This includes industries like financial institutions safeguarding personal banking data, healthcare organisations, and government agencies.
The Root of Trust
HSMs are considered the Root of Trust (RoT) in many organisations. An RoT is an essential, foundational component of security, providing a set of trustworthy functions that the device or system can use to establish high levels of security.
RoTs are often incorporated as a chip, giving devices a trusted source to be relied upon in any cryptographic system. Its functions include trusted boot processes, measurement, secure storage, reporting, and verification.
How Hardware Security Modules Work?
A HSM generates, rotates, and protects keys, in which these keys are always randomly generated to ensure enhanced cyber security. The physical device contains the hardware that makes it possible to generate these random keys.
On a simple level, when an organisation carries out an encryption or decryption task, for example, the HSM retrieves the required keys from its secure location. The task is conducted within its protected environment, then returns the result. It’s this process that ensures the keys remain secure throughout all relevant cryptographic tasks.
A HSM device reaches its high levels of security because of these features:
Isolated processing environment
The core principle behind an HSM is the secure vault within an organisation’s system. It operates as a separate environment that is physically isolated from your main computer system. This isolation reduces the risk of malware or unauthorised access to the host system — both of which can compromise your business cryptographic operations.
Tamper-resistant hardware
What makes an HSM secure is how it’s built. A HSM is made of tamper-resistant hardware, designed to resist any physical tampering efforts by those with prohibited access, e.g. hackers. The device is often kept separate from an organisation’s computer network to prevent security breaches. An attacker would need physical access to the HSM to even view the protected data, let alone manipulate or steal it.
Alongside its robust materials, the devices also feature complex alarm systems. Should anyone try to tamper with the HSM, high-security measures are triggered (keys might be rendered useless or in more extreme cases, self destruction abilities).
Secure key management
HSMs have a number of functions to ensure the highest level of security for key management, including:
- Generating random cryptographic keys: This element differs from a standard PC that may not generate a truly random key. This function ensures the keys generated within the HSM are unpredictable.
- Secure storage: HSMs employ techniques such as hardware encryption and access control to make sure the keys are inaccessible to unauthorised personnel. The keys never leave this secure environment, and it’s only the encrypted/decrypted data that’s sent back and forth between the HSM and the host system. Even if the host system becomes compromised, the risk of key exposure is minimal.
- Key rotation: HSMs facilitate secure key rotation, enabling old keys to be replaced by new ones — reducing the system’s vulnerability.
- Key destruction: At the end of a key’s life cycle, there is a secure method for destruction, ensuring old or compromised keys are fully destroyed.
Secure cryptographic operations
HSMs carry out a variety of secure cryptographic operations, such as:
- Encryption & decryption: HSMs can encrypt data using the device’s stored keys, making it unreadable to unpermitted parties. Only those with the corresponding decryption key can access the original data, and vice versa. Decryption turns encrypted data back into its original form.
- Digital signing & verification: HSMs can digitally sign electronic documents, such as business contracts, using private keys. It creates a digital signature that verifies the authenticity and integrity of the document. Anyone can then verify the signature using the corresponding public keys, ensuring the document hasn’t been mishandled.
- Hashing: A HSM can generate a unique digital footprint (known as a hash) of data. The hash can then be used to verify the data’s integrity and detect any modifications.
Secure communication
Then there’s the secure communication element of a HSM. The device can communicate with the host system through secure channels, often implementing protocols such as PKCS#11 or TLS. These protocols ensure data exchanged between the HSM and host system is confidential.
HSM has strict access controls to prevent misuse and/or data falling into the wrong hands, including these features:
- User authentication.
- Authorisation levels.
- Detailed audit logs to track access events and cryptographic operations performed.
The HSM works by combining the above features, providing a secure environment for organisations to manage and use cryptographic keys. The device acts as the guardian of these keys, ensuring the confidentiality and authenticity of your organisation’s sensitive data.
Why Businesses Should Use HSMs
Encryption and digital signing become more or less worthless to an organisation and its sensitive data if the private keys used are not well protected. Data protection is a high priority for businesses, since cyber hackers nowadays have the expertise to locate private keys, whether they are stored or in use.
The 2024 Cyber Security Breaches Survey discovered half of UK businesses have reported some kind of data breach over the previous 12-month period. And 75 per cent of companies view cyber security as a high priority for its senior management team.
HSMs set the standard for strong data protection of private keys and associated cryptographic operations. It’s a beneficial device, providing your organisation with:
- The ability to meet security standards and regulations (e.g. GDPR, eIDAS, PCI DSS, and HIPAA).
- High levels of trust and authentication.
- Tamper-resistant, tamper-evident, and tamper-proof systems.
- The highest level of security for the handling of sensitive data and cryptographic keys.
- Storage for all your cryptographic keys in one place, rather than several locations.
- Quick, efficient cryptographic lifecycle processes.
Security & compliance
HSMs can help ensure your organisation complies with necessary legal and regulatory frameworks, which are often fundamental when a company manages sensitive information for any specified reason. The device protects sensitive data, including personal identifiable information and online transactions. It also adheres to high-quality practices in audits and risk assessments.
Risk mitigation
By implementing an HSM, your organisation can reduce its risk of data breaches, and thus, any potential fines you could receive as a result of a breach. HSMs also protect from facing non-compliance fines, which can be a substantial cost to your business.
Since the device offers such high levels of security, you can avoid reputational damage that you could face should your organisation fail to meet standards and regulations.
HSM use cases
HSMs are utilised in a wide range of industries and applications. Here are some ways HSMs are used:
- In government and defense
National security relies on protecting classified information and ensuring secure communication channels. For example, HSMs encrypt sensitive government data both in storage and in use.
- Financial services
The finance industry is often subject to constant cyberattacks, with sensitive data like credit card details and account information targeted. HSMs play a vital part in safeguarding this type of data by protecting payment card keys, securing digital identities, and safeguarding cryptographic keys used for electronic signatures.
- Public Key Infrastructure (PKI)
PKI relies on HSMs for secure storage and management of Certificate Authority (CA) keys, ensuring the entire PKI ecosystem remains integral and trustworthy. This includes digital signatures.
- Blockchain technology
Blockchain single handedly relies on cryptography to maintain a secure and tamper-proof database. HSMs enhance blockchain security by protecting the cryptographic keys and securing consensus mechanisms in permissioned blockchains.
- Healthcare
The healthcare industry handles and stores sensitive data daily. HSMs enable healthcare facilities to contribute to necessary compliance by encrypting electronic protected health information, securing digital signatures on medical records and prescriptions, and ensuring secure communication.
- Ecommerce
Online payment options request high level security measures to protect the customer’s data and financial information. HSMs can secure payment card information during online transactions, protect digital identities, and safeguard cryptographic keys used in communication between ecommerce websites and its customers.
- Digital Rights Management (DRM)
To protect copyrighted content, robust encryption and access controls are necessary. HSMs can be used for DRM by securing cryptographic keys used for encrypting copyrighted data to prevent unauthorised access or distribution. The device can also be used to manage digital licenses and access rights associated with protected content.
Across the board, HSMs can be used for:
- Tokenization.
- Secret management.
- Code signing.
- TLS/SSL applications.
- Conducting payments.
- Maintaining control of data in cloud applications.
HSM as a service/cloud HSM
Organisations can utilise a HSM onsite or outsource the data management to a cloud-based HSM subscription service. This kind of service provides the same level of protection as an onsite HSM; it simply means you don’t need to host or maintain the HSM yourself.
A cloud HSM can:
- Support finance and procurement preferences.
- Simplify organisational budgeting for business-critical security.
- Enable highly skilled security professionals to focus on other important tasks.
- Meet top security and compliance mandates.
- Align crypto security requirements with organisational cloud strategy.
Challenges and Considerations of HSMs
While HSMs offer an unrivalled level of cryptographic protection, the devices are not without challenges.
For example:
- The high upfront cost for HSM (prices can vary from £1,000 to £42,000 per device).
- The specialised knowledge required for HSM setup and management.
- Possibility for integration issues when implementing an HSM into your organisational structure.
- Subscription costs for cloud-based HSMs.
- Multi-tenancy capabilities.
The Future of HSMs
Despite the possible challenges, the future for HSMs is bright. We can expect to see HSMs used to support advanced AI-driven threat detection, edge computing and IoT integration, and zero trust frameworks.
HSMs are a critical defence mechanism, whether implemented onsite for your organisation’s cryptographic tasks or via the cloud. HSMs promise strong data protection, ensuring data remains secure, compliant, and verifiable.
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