As the world of cryptocurrency and SPACs steal the headlines, and the financial services industry grapples with the new Risk-Free Rates replacing LIBOR, topics such as change standards struggle to compete for the limelight. Change standards are policies that provide the foundations for effective organizational change management. The implementation of these policies ensures quality through a more rigorous assessment of change execution, validated through enhanced processes and artifacts to support the change. The blistering pace of digital transformation and technological advancements, further accelerated by the pandemic’s influence on customer behaviors and needs, has seen bank executives prioritize adherence to change standards in order to keep pace with this evolution. Across financial institutions, change manifests itself in the form of new technologies or processes to achieve regulatory compliance, deliver a new product or service, or improve a process to drive operational efficiencies. Now, more than ever, financial institutions must deliver this change quickly, or risk falling behind the competition. Needless to say, it’s a daily challenge for financial services firms to stay at the forefront of innovation to remain competitive in this dynamic landscape.
Regulatory oversight is a crucial ingredient for a sound yet competitive financial services industry. The Federal Reserve (Fed) and the Office of the Comptroller of Currency (OCC), which oversee the operations of financial services firms, regularly assess firm compliance with regulatory standards and practices. When the Fed or the OCC identifies an issue, a procedural concern, or a threat to the institution, they can raise a Matter Requiring Attention (MRA) letter to that company and demand that the firm pay serious attention and act quickly to remediate. If the matter in question isn’t addressed in a timely fashion, regulators can impose fines, and ultimately prevent the company from doing business. Since 2008, nearly $120B in fines have been levied against financial services companies for a variety of reasons. Last year, the OCC assessed a civil money penalty against a major financial institution over longstanding deficiencies in enterprise-wide risk management, compliance risk management, data governance, and internal controls. This, perhaps more than anything else, underscores the need for strong change standards. Without them, corporations are susceptible to fines, poor public, and media relations, and in rare instances even collapse.
Change standards should be seen as an immense benefit to a corporation. The successful implementation of these standards can increase accountability within teams assigned to deliver change, afford program sponsors a greater degree of oversight over service provider teams, and ultimately set a high bar for regulatory compliance as the standards can serve to illustrate to the regulatory oversight bodies how the organization is approaching and executing change. Next, we examine the lifecycle of a technological change project from start to finish to better understand how to change standards fit into conventional project management. The four key phases of change standard implementation include: analyze, plan, build, and operate.
Analyze: Establishing change standards begins with understanding the change in question. Looking into documented business requests, reviewing the details of new regulations, or honing in on an action point based on an MRA directive are all good places to start. A strong business case with sponsorship from company management is key to driving change. Program champions are crucial when it comes to enlisting their buy-in, which in turn helps catalyze project initiation.
Plan: After identifying and isolating the necessary change comes the planning phase. Begin by creating a clear project definition and a specific set of objectives. Lucidity is crucial here. The more straightforward goals and expectations are, the better. Identify any known risks and possible concerns, and encourage project administration to use standardized tools to make progress and status tracking easier. Make sure the budget is sufficient to execute the change, and then corroborate the plan with user stories and a comprehensive set of well-detailed requirements. These requirements and tasks should be documented in a tracking tool product such as JIRA.
Build: Here’s where things get a little more active. In the “Build” phase, the change is developed, tested, and deployed. The technology development should be rooted in the firm’s standards, driven by end user requirements, and maintain high standards of quality assurance (QA). Users utilizing a documented test strategy that is signed off by the lead Technology stakeholder and impacted users. Documented User Acceptance Test (UAT) with test scripts, expected outcomes, and clear sign-off from the noted stakeholders. Deployment of the change has all of the necessary approvals in place and it is communicated out to the stakeholders and production support.
Operate: This is the final phase of a project lifecycle, where the change has made it past production and is now in use. There isn’t much left to do, but two things are absolutely critical. The first is jurisdictional; once the change is finalized, management of the product needs to shift from the development teams to production support. The second pertains to flexibility; make sure there’s an open feedback loop left in place that allows users and businesses to provide meaningful input that gets implemented at some point down the road. This, alongside the other three phases, create a strong change standards environment, protecting a company’s best interests and helping it navigate a rapidly changing environment.
Remain Agile
It’s true that change standards can seem challenging. Sometimes, they might even feel like they’re getting in the way of innovation, and implementing such standards in today’s landscape poses an ongoing challenge for large financial institutions. Many of the technology teams in financial services have been focused on building out their Agile methodology capabilities over the past few years in order to react quickly to change and stay competitive. Although change standards can have the look and feel of a waterfall methodology, teams must prioritize weaving an Agile approach into their existing development strategy. This can be achieved by continuing to hone Agile methodology capabilities while supplementing those executions with the strong documentation creation to support those changes. That documentation can be stored to demonstrate adherence to those Change Standards and satisfy any review.
The One Constant
It’s often said that the only constant is change, and while it’s a bit of a cliché, it is a cliché for a reason—it’s true, and especially true in the financial services industry. Now, firms aren’t just responsible for effecting change, they are responsible for establishing standards for change that make it viable, compliant, and successful.
About Monticello
Monticello Consulting Group is a management consulting firm supporting the financial services industry through deep knowledge and expertise in digital transformation, change management, and financial services advisory. Our understanding of the competitive forces reshaping business models in capital markets and digital banking are proven enablers that help our clients remain in compliance with regulations, innovate to be more competitive, and gain market share in new and existing businesses. By leveraging our Change Management services, Monticello will help transform your business operations and cultural mindset to one where excellence takes center stage.