Managing Operational Risk When Selecting Systems

Change happens. How you plan for it and prepare your team is ultimately the key to success or failure. Particularly as leaders consider evaluating new solutions–whether it is the bank’s core solution or ancillary solutions–the assumption should be that there is potential for change to occur. To manage that change effectively, it’s beneficial to ensure your operational house is in order and well documented. 

PRI Director of Systems and Automation Mike Neale says it is common for smaller financial institutions to neglect to document their unique internal processes, relying heavily on mechanical documentation alone. Unfortunately, mechanical documentation does not always connect the dots between the process and the business need it meets or allow for the degree of resiliency necessary. As one industry perspective notes, “You need to do more than just write the information down and hope employees will figure it out.” When it’s time to manage a change or evaluate a new system or product, you don’t want leaders to be left without critical guidance to inform their decisions.

“We recommend building out a business process management activity and library and getting it done before the evaluation process or change occurs,” Neale recommends. “The library should contain ‘living’ documents that are kept up to date continuously. It’s a good practice to maintain because you never know how and when change may occur, and documenting under pressure is tough.”

This idea of a “living” library is critical. Business process management is not static—“it’s not a one-time project; it’s a continual process.” Without that ongoing discipline, institutions risk losing visibility into how work gets done. In fact, “without structured and well-managed processes, businesses risk inefficiencies and errors,” making change events far more disruptive than they need to be. – PRIME BPM

A BPM library has other benefits in addition to helping the team select new solutions and products, including onboarding new employees, training existing employees and identifying opportunities for automation. More importantly, it creates clarity. As one source puts it, “without clear processes … there is no clarity or visibility into how work is conducted.” A well-constructed documentation library uncovers process efficiencies and delivers real value to the bank. Neale said banks can begin with their DR/BCP documentation. Over time, they can allow the DR manual to reference the BPM library.  

Building a Business Process Management Library

The BPM library should contain documentation—written at a high level of detail—describing every recurring process that happens daily, weekly, monthly, quarterly and annually across the organization. Documentation should outline the inputs, the process and the outputs. 

“The process should not be only about the mechanics,” Neale said. “It should also include the business reason behind the process. What’s the why? Not every solution requires the same mechanical steps, and by focusing on the why, you’re in a better position to discuss it in a way that transcends mechanics.” 

Unfortunately, this is where many institutions fall short. Documentation that exists but isn’t usable can be just as problematic as no documentation at all—often resulting in “hundreds of random guides… that nobody can find (and nobody can use).” To be effective, process documentation must be accessible and actionable in real time, enabling employees to reference it “in the moment they need it.” – ScreenSteps

Neale shared a powerful example from his first conversion for a small bank. On the Monday following a weekend conversion, a team member asked where to locate the number for her “pink ticket”—a daily manual process she had always performed.

Historically, some core systems didn’t automatically create GL entries to match subsidiary ledger transactions during end-of-day processing. The following day, entries had to be manually posted before updated reports could be generated. The bank’s new system automated this entirely, eliminating the need for the manual step.

“If the process document only describes the mechanics, the fact that you no longer need to make the entries to be in balance will likely get lost,” Neale said. “But if we know the business reason behind a process—such as the need to balance the ledgers—we can determine if the new system fills that functional gap or not.”

Once complete, a BPM library becomes a powerful evaluation tool. It allows prospective vendors to clearly demonstrate how their solutions support, modify or replace existing processes. It also serves as the foundation for a functional gap analysis and supports more informed decision-making—because “BPM enables more confident, data-informed decisions.” – PRIME BPM

During the conversion process, the library plays an even more crucial role. The BPM framework along with the documentation of your financial products will serve as a guidepost in the conversion process to ensure nothing is overlooked. While the mechanics will inevitably change with a new system, updated documentation provides the backbone for organization-wide training prior to conversion and supports long-term onboarding success.

Building a Financial Products Catalog

In addition to process mapping, Neale recommends maintaining a catalog of financial products including all business logic associated with interest accruals, service charges and fees. This catalog should encompass all platforms such as DDA, Savings, Loans and Safe Deposit Boxes.

This step is essential for aligning technology decisions with business strategy. Successful institutions prioritize aligning technology investments with strategic objectives to ensure systems truly support the business—not the other way around. – PRI

The financial products catalog helps identify gaps in prospective solutions’ business logic. While most core platforms offer flexibility, it is entirely possible for a financial institution to have product features that one system can support and another cannot. 

“As you get deeper into a new system, the financial products catalog will support those business logic processes,” Neale said. “When you have a robust, well documented list of the products and services you offer, you will make better decisions when the time comes to change your products. If a new solution doesn’t support a particular business function we’ve identified, do you really need it?”

Our experts

Mike Neale, Director of Systems and Automation, has more than 30 years of experience in organizational transformation and acceleration, specializing in financial technology and operations.

Resources

• How to Document Procedures in Your Bank or Credit Union (5 Steps) – ScreenSteps
• Business Process Management – A Complete Guide – PRIME BPM
• 4 Tips for Aligning Technology with Business Strategy – PRI 

PRI specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.