As the technology infrastructure relied upon by financial services firms to carry out their day-to-day operations becomes increasingly complex, a survey undertaken by SunGard Consulting Services has revealed concerns that the testing of these systems is insufficient to protect against failure.
The group polled 354 chief operating officers (COOs), chief information officers (CIOs), project managers, IT managers and quality/test managers in late 2012 and summer 2013. Survey participants were from insurance, retail banking, commercial banking and capital markets organisations in the US, the UK, Ireland and the Middle East. The organisations ranged in size from under US$20m to more than US$15bn in annual revenue.
The group commented that while testing is crucial to maintaining performance, satisfying customers and meeting compliance demands, the cost is a growing concern for financial institutions (FIs):
- Cost represented the single biggest challenge for survey respondents, followed by insufficient time to meet deadlines, incomplete or ambiguous requirements and insufficient resources.
- For 23% of respondents, the cost of testing exceeded a quarter of a project’s entire budget.
- Nearly three in five respondents said that budget restrictions impeded the improvement of the testing process.
System testing often causes disruption to a firm’s day to day operations:
- Three out of four survey participants said that having a testing operation underway has a medium-to-high impact on normal business processes and operations.
- Perhaps as a result, nearly three out of five survey respondents indicated there is an appetite within their organisation to improve testing processes
Today’s hypercompetitive industry and growing regulatory scrutiny are the main drivers for financial services firms to improve testing capabilities:
- Asked to name one or more factors influencing improvements in testing, 50% of survey respondents cited the introduction of new product and service offerings, 45% cited regulatory requirements, while 53% cited the rollout of upgrades and new releases, often related to meeting either industry or regulatory demands
Of the regulations driving increased focus on system testing, Basel III is the most prominent:
- Forty per cent of those who saw regulations as a driver cited this international standard as boosting the need for improved system testing.
- Aside from general banking requirements, local regulations were the next strongest drivers, including the single euro payments area (SEPA), the Foreign Account Tax Compliance Act (FATCA) and Ireland’s Consumer Protection Code.
Institutions are relying heavily on their own staff to perform testing:
- Forty-three per cent of respondents indicated that they employ internal testers who are industry trained, although 32% rely on untrained internal personnel or line-of-business resources.
- More than half of respondents are not considering outsourcing some or all of their system testing, potentially losing as a result economical improvements and efficiencies.
- Nearly three quarters of respondents reported having ten or fewer test personnel, meaning that the strain of managing today’s complex IT environments is typically being met by limited resources.
“Impending regulatory deadlines, such as SEPA in the European Union [EU], present a number of challenges to firms to be in compliance,” said Michael O’Connor, project manager for information systems and development, ACCBank.
“Having a smoothly operating technology infrastructure is crucial to satisfy both regulators and clients.”
Stephen O’Reilly, quality assurance practice lead, SunGard Consulting Services, said,: “Testing has become a crucial part of any FI’s operations. Regulatory pressures and client demands are driving them to do more things faster and with fewer resources.
“At the same time, software failures can cost FIs dearly in terms of loss of business and reputation. How testing is conducted and by whom is therefore paramount in helping ensure that as much of the risk associated with potential failure is identified early in the testing process and then mitigated where possible. Outsourcing testing processes to a third party and engaging test professionals can help reduce cost and increase performance, helping ensure that operations run smoothly and smartly.”
The full survey report and a webinar discussing these topics in more detail can be accessed here.
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