How financial services firms can manage IT during the credit crisis

While IT organizations at financial services firms had little to do with creating the current credit crisis, CIOs are finding themselves dealing with the fallout.
As Wall Street moves to shore up its damaged image, major financial services firms are cleaning house of top executives. CIOs are now faced with providing transparency into their IT initiatives to new management teams and helping them to understand the implications of changes in IT budgets and strategies. With estimates of losses among several investment banks ranging from the tens to the hundreds of billions of dollars, CIOs must accomplish more with less.
When investigations into potential fraud occur, CIOs must be able to support their organizations by quickly providing the electronic information – unstructured emails, instant messages and user-generated contract – required during the investigative process. At the same time, IT systems must continue to operate without outages and with high performance while minimizing IT risks and complying with regulations.
By adhering to the following five IT best practices, CIOs at financial services firms can better address the challenges resulting from the current credit crisis, operate within tighter budgets and deliver new value.

Provide transparency into IT operations

As financial services firms replace senior executives, CIOs must demonstrate to new bosses, investment and retail banking groups as well as other business partners how they’re currently investing their budget, the value they provide and the implications of any new initiatives or budget cuts.  
IT governance bridges the gap between IT and the business side of the firm. It enables CIOs to provide executives with transparency into IT operations, the value from IT dollars and how IT initiatives align with the strategic objectives of the firm. IT governance delivers improved visibility into the firm’s IT resources – providing graphical dashboards that illustrate the relative sizes of various projects, costs, number of people involved, whether the project is on schedule and other project information. It also enables “what if” analysis to help executives prioritize initiatives.
Already, the top global systems integrators use IT governance capabilities both to manage their internal IT projects and to provide these capabilities to their top financial services clients.

Do more, spend less

During the housing boom, mortgage lenders earned substantial profits and could afford to spend heavily on IT resources. Now, in the face of staggering losses, the new mantra has become, “Do more spend less.” CIOs can achieve substantial cost reductions through workload automation and by eliminating redundant software.

CIOs need to maximize the work they can accomplish using existing mainframes and distributed systems while minimizing the staff devoted to job scheduling. Workload automation capabilities allow IT to process workloads based on policies, real-time events or triggers as well as to handle exception conditions automatically across the enterprise. This enables financial services firms to improve the delivery and availability of critical business services while reducing costs. The issue of workload automation has become so important that many of the largest financial services firms on Wall Street have joined forces with us to form the Autosys advisory council to discuss IT capabilities they need to better automate workloads.

Financial services firms can also realize significant cost benefits by eliminating redundant software and standardizing on software from a single vendor. Such consolidation reduces software licensing fees and the need for maintenance and administrative staff – since firms no longer need different people with knowledge of different products to perform the same function.

Respond to regulatory investigations

With the credit crisis has come the realization that many sub-prime loans, particularly those from second-tier financial institutions, were fraudulent. As lenders conduct and respond to investigations, IT must support these efforts by developing systems that can rapidly and cost-effectively retrieve confidential unstructured data – emails, instant messages and other user generated content – that may be requested. The Financial Services Technology Consortium (FSTC), which is comprised of more than 40 major financial services firms, consultants, associations, standards organizations and technology vendors, is currently working to help financial services firms establish world-class electronic document/records management policies, procedures and technologies.

Manage IT risk and compliance

With the credit crisis, financial services institutions have turned their attention to carefully evaluating and managing risk throughout the organization. While IT is not responsible for credit risk or market risk, it does need to manage IT operational risk from people, processes and systems as well as compliance with Sarbanes Oxley, Basel II, PCI and other regulations. Governance, risk and compliance (GRC) solutions enable IT to make fact-based decisions about and oversee their enterprise risks by correlating organizational risk and controls to corporate policies, best practices and regulatory requirements. These solutions also help IT manage the staffing and execution of all GRC work.
Governance, risk and compliance management solutions incorporate a unified compliance framework that incorporates hundreds of established standards and applicable regulations. This enables IT to rationalize controls across multiple regulations and standards to minimize duplication and costs. Dashboards and reports provide a portfolio-type view of all monitored risks, furnishing insight into the current status of activities for regulatory compliance and risk mitigation as well as allowing IT to manage these efforts. 

Maintain transaction performance and efficiency

Despite tighter IT budgets, IT organizations must continue to verify that transactions perform well and execute efficiently – not to mention guard against high severity outages – or they risk losing customers for the businesses they support. Therefore, IT needs to proactively monitor customer transactions and manage the distributed IT infrastructure to validate that service levels remain intact and that customers remain satisfied.
IT management capabilities provide real-time visibility into distributed applications and connected systems. Alerts notify IT staff and business teams of defective customer transactions, degraded performance or problems in packaged or custom applications. This enables IT to detect existing or potential performance problems, then precisely and rapidly pinpoint the source of the problem to resolve it quickly. At the same time, business managers and executives know whether or not their applications are working, service level agreements are being met and how the business is actually running at all hours of the day.  
By following these five best practices, IT organizations within financial services firms can help their firms respond proactively to the new challenges that have arisen due to the credit crisis. As a result, they can add new value to their organizations – and document that value – even as they adjust to budgetary pressures. 

Mark Bubar is Vice President of Financial Services for CA, Inc.

CA viewpoint: best practices for managing IT during the credit crisis in financial services