Testing crisis revealed in financial services infrastructure

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2 May 2014 | 0

The key systems supporting financial services firms are in danger of failure as their testing has been found to be insufficient.

This is the major implication from a report from SunGard Consulting Services after it carried out a survey among 354 chief operating officers (COO), chief information officers (CIO), project managers, IT managers and quality/test managers in late 2012 and summer 2013.

Chiefly among insurance, retail banking, commercial banking and capital markets organisations in the US, UK, Ireland and the Middle East, the respondents said that cost pressures, followed by insufficient time to meet deadlines and incomplete or ambiguous requirements and insufficient resources were their primary challenges in testing key systems.

The smooth implementation of upgrades or new technology is crucial in helping ensure that financial services firms can offer new or improved products and services to their customers and retain a competitive advantage, says the survey report. Failure to properly test technology, however, can result in outages and downtime that may lose the firm business and cause reputational damage.

For nearly a quarter of respondents (23%), the cost of testing exceeded a quarter of a project’s entire budget, while 60% said that budget restrictions impeded the improvement of the testing process. Furthermore, it was reported that system testing often causes disruption to a firm’s day to day operations, with three quarters saying that having a testing operation underway has a medium-to-high impact on normal business processes and operations.

The effect of all this is make organisations reluctant to test as rigorously as desired, with nearly three out of five indicating there is an appetite within the organisation to improve testing processes.

The current hypercompetitive industry and growing regulatory scrutiny were cited as the main drivers for financial services firms to improve testing capabilities.

When asked to name one or more factors influencing improvements in testing, half cited the introduction of new product and service offerings, with 45% citing regulatory requirements and 53% citing the rollout of upgrades and new releases, which in many instances are related to meeting either industry or regulatory demands.

Of the regulations driving increased focus on system testing, Basel III is the most prominent. Some 40% 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 SEPA, FATCA and the Consumer Protection Code.

“Impending regulatory deadlines, such as SEPA in the European Union, present a number of challenges to firms to be in compliance,” said Michael O’Connor, project manager for information systems & development, ACCBank. “Having a smoothly operating technology infrastructure is crucial to satisfy both regulators and clients. Engaging SunGard to assist us in the testing of our systems ahead of the SEPA deadline has meant that we can be confident that we will meet the needs of both on an ongoing basis.”

The survey found that institutions are relying heavily on their own staff to perform testing, with 43% indicating that they employ internal testers who are industry trained. However, 32% rely on untrained internal personnel or line-of-business resources. More than half of respondents were 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.

“Testing has become a crucial part of any financial institution’s operations,” said Stephen O’Reilly, quality assurance practice lead, SunGard Consulting Services. “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 financial institutions 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.”


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