As Small and Medium Scale Businesses (SMBs) adopt cloud infrastructure at an ever-increasing pace, the demand for efficient and cost-effective incident response systems is more significant. This paper investigates a fully automated incident response activity for mitigating performance degradation in cloud environments such as AWS EC2 instances. With crucial AWS services like CloudWatch for monitoring, SNS for notifications, and Lambda for automated responses, the setup allows for near real-time detection and mitigation of high CPU utilization events, which IT admins can do in SMBs. Testing the system proved its ability to monitor, alert, and isolate specific instances that were under stress, enabling quick isolation and minimal disruption to operations while providing enhanced stability with minimal manual intervention. The results showcased the ability of the system to improve cloud performance, scale, and security, all as a cost-effective solution for SMBs. It highlights how automated incident response systems can not only significantly reduce the cost of managing cloud infrastructure but also create supplementary solutions that can guarantee the reliability of organizations such as SMBs who want to make their operations more resilient rather than fragmented or paralyzed.