GRC is essential because it addresses all three keys to better risk management:

1. It institutionalizes standards and procedures;
2. It enlists cooperation and commitment from all lines of business; and
3. Everything is backed by compliant technology and operations support.

So how can you get started? It begins at the top – by defining your risk appetite. Risk is a given in any business environment, but every company – in fact, every line of business – has its own risk tolerance level. Do current programs satisfy your risk appetite? If not, it’s incumbent upon the institution’s board of directors and senior management team to clearly define a risk tolerance limit for each line of business – and communicate it to everyone involved.

Next, it’s important for organizations to strengthen their risk identification processes by viewing risk more holistically and assuming a more vigilant stance on risk identification policies and procedures. That means: adopting stricter portfolio risk-grading systems; more tightly screening on-boarding procedures for new customers; creating a cross-functional management committee on which all business units are represented; improving product approval policies and procedures; and adopting more robust reporting on risk conditions and escalation requirements.

If this sounds like a major effort, it is. But it’s worth it, because when you’re done, you’ll be able to put together a comprehensive ERM program that gives you the tools to continuously gauge your level of risk against accepted tolerances and address those that exceed them. You’ll be able to comprehensively track trends, assess the quality of your risk management initiative, and make appropriate adjustments to the program as needed. At the same time, you’ll be able to align your supporting technology with the business risk governing model for greater effectiveness.

ERM is clearly a major focus for banks today. According to a 2010 survey by Tower Group, by 2012, banks expect to increase spending on:

• Credit risk by 5.6%;
• Market risk by 7.6%; and
• Operational risk by 7.8%.

As ERM consultants with experience designing and implementing a GRC approach, ADS can be a key partner in the effort, providing: current state program assessments and auditing to ensure strategic alignment; program design and engineering; regulatory compliance guidance; training; project implementation; and program management.

When you take a holistic approach to risk management, you’ll be in a better position to manage it, protect your good reputation, achieve compliance – and stop worrying about plugging holes.

But that’s not all. Now that regulators are cracking down on companies that tolerate excessive risk, an ERM program with GRC guidance may even keep your business from being shut down.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email mel.feeney@adsfs.com to match you with the correct ADS resource for your needs.

So, yes, they are competing on price. But what they’re not doing is taking into consideration the overall relationship value of each customer. I’m not talking about loan history; I’m talking about other areas where the bank might do business.

At this one moment when the bank is interacting with the customer – one on one – there is no cross selling. There is no effort to deepen the relationship. It’s as if bank employees have no incentive or vehicle to go after wallet share. The banks seem solely concerned with financing or refinancing a mortgage.

I know this to be a fact. I asked at five different banks when I recently sought to refinance my home mortgage. No one – in the branch office, online or over the phone – was prepared to make me a deal. All of these banks are siloed to the point where the manager either had to refer me to a co-worker (to talk about moving over my trust accounts) or first close the book on my mortgage deal before separately discussing my opening a deposit account or an auto loan.

When I asked if they could bundle these services and loans – giving them all my banking business – in exchange for knocking a fee off my refinancing, no one offered me a deal. The best I got was “We’d love you more” – this from a large Canadian bank seeking to grow its US customer base. Unfortunately for them, I have all the love I need, so that didn’t move me much.

And this is after they just finished looking at my household income, credit scores, outstanding loans, assets, etc. Okay, I’ll be honest – while we have a high credit rating, a home that’s half paid for, and minimal credit card balances, we don’t exactly fall under the Warren Buffett rule. But still …

So eventually, I refinanced our home with a new bank and left all my other financial assets with the three other banks (and five bank silos) we were already doing business with.

This doesn’t make sense – for customer convenience, loyalty-building, operational efficiency, revenue enhancement, or profitability.

Most of all, it doesn’t make sense because proven technologies already exist that can help banks bundle services, customize fees, and create optimal customer profitability plans.

In Part II of this series, we’ll explore what those technologies are and how they would work in a bank that has a holistic view of each customer and the power to make deals like the one I was proposing.

In the meantime, if there’s a banker reading this who would like to cut a deal with me, I now have a new car (oops – I’m up to four banks now) and lots of home remodeling projects on the horizon. You know where to reach me.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email stephen.higgins@adsfs.com to match you with the correct ADS resource for your needs.

That’s not unlike the situation financial institutions find themselves in today as they strive to manage risk and exposure in an ever-changing business environment. Everything has gotten more complex and the regulators aren’t making it any easier:

• The Dodd-Frank Act mandated hundreds of new rules, but relatively few of them have been finalized to date – making it extremely difficult to plan accordingly.
• On the security side, hackers are becoming more sophisticated – and more brazen. Citi had to dish out $2 million to replace customers’ credit cards after 200,000 accounts were compromised in a cyber-attack in June. Even RSA – a leading IT security vendor – was the victim of an Advanced Persistent Threat (APT) last March.
• The growth in newer banking channels, such as mobile phones, is creating more points of entry to banking systems – and therefore, more points of potential systemic risk vulnerability.
• The use of disparate, non-integrated tools to manage risk complicates the effort and creates the opportunity for things to fall between the cracks.
• A lack of consistent, top-down risk management policies and procedures increases the opportunity for confusion within the institution.

In this complex environment – where you’re busy playing “Whack-a-Mole” constantly – it’s challenging, but not impossible, to be more proactive. One way to do it is by taking a top-down Governance/Risk Management/Compliance (GRC) approach.

GRC is a holistic approach to ERM based on the idea that governance, risk management, and compliance are intricately interrelated – not separate issues to be managed by separate organizations within the institution. A GRC initiative establishes a baseline for setting risk management priorities. It sets performance thresholds that, if not met, command immediate attention. It puts in place a uniform set of standards and procedures across all three areas and all disciplines, and ensures they are followed by mandating the same high level of commitment from all organizations and lines of business. This in turn ensures the coordinated technology and operations support to make it all work together. The result is a more comprehensive, integrated approach to ERM that can help an organization stay ahead of ever-changing regulations and multiplying threats.

In our next ERM blog posting, we’ll delve deeper into the nuts and bolts of GRC. Until then, I’ll leave you with this closing thought: taking a GRC approach to enterprise risk management requires that people change not only the way they perform their risk-related responsibilities, but also the way they think about risk management. That’s not a small change. But the rewards of doing it successfully are worth it – that is, unless you’d really rather continue to play “Whack-a-Mole” against a growing number of risks.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email mel.feeney@adsfs.com to match you with the correct ADS resource for your needs.

With the stakes so high, none of us would willingly entrust our heart transplant procedure to a surgeon who’d never performed the operation before. Nor would we go under the knife before we’d done extensive research and sought out multiple expert opinions on the right course of treatment, and its effect on our lives in years to come.

Yet, that’s essentially what some banks have done with their core conversions. Sure, they go through an RFP process and evaluate competing vendors on major criteria and benchmarks. But often, the problem isn’t that they’re not asking questions – it’s that they don’t ask the right questions.

Take regulatory compliance, for example. If you ask a non-US vendor, “Can you do US regulatory compliance?”, they will almost always say, “Yes.” They are, after all, trying to make a sale. But if you ask, “Have you done US regulatory compliance before?”, you’re more likely to find out if that vendor is counting on your bank to finance its next software release.

For US vendors, a different question is in order. “After a conversion, are you prepared to handle the continuing mass of regulatory changes being imposed on the Financial Services Industry?” Too often, we find that vendors are struggling to keep up with business as usual (maintenance, fixes, new releases) and, as a result, they pick and choose which customers or customer segments they can support. If you’re trying to grow your institution’s capabilities and customer footprint, you don’t want to be on the wrong side of that list!

That’s why it makes sense to engage an independent third-party partner like ADS early in the core conversion process. We know what regulatory compliance requires – both as part of the conversion and thereafter. We know how to ask the tough questions. We can help craft RFPs and benchmarks that clearly separate the contenders from the “wannabes.” And we make sure your solution is right-sized for your future.

Some banks facing a multi-million-dollar core conversion project might balk at paying a bit more to have that independent voice at the table. But – as we’ve seen first-hand – that extra investment in experienced oversight can ultimately save millions.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email peter.cahill@adsfs.com to match you with the correct ADS resource for your needs.

That old truism is a particularly unsavory one for the banking industry, which has little taste for regulatory sausage in any form. Besides the fact that links made in Congress can be costly and hard to swallow, every time a new regulatory sausage is produced, financial institutions must find a way to incorporate it into their business processes to maintain compliance. And like making sausages, the process of adapting banking systems to ensure compliance can be messy and unappealing. New errors, greater inefficiency, and increased complexity can be introduced every time a new regulation is incorporated.

Clearly, as banks grow and adapt to changing market conditions, they need infrastructures and banking processes that are adaptable enough to grow and scale with them. Any banking system has to be able to quickly and easily support the institution’s strategic objectives, such as introducing new products, entering new markets, merging functionality, measuring performance, and so on. These are all contingencies that can be planned for and built into systems and processes.

But compliance is different. It defies even the best-laid plans, because banks must not only account for the existing myriad of laws and regulations, but also any number of future, as-yet-unknown regulatory changes. So even banks with the best automated, scalable processes can be caught flatfooted. The result could well be a room full of expensive lawyers individually reviewing and approving every bank loan to ensure compliance with the new Dodd-Frank consumer protection law – and worse, having to manually re-enter the data every time.

But wait – aren’t banking software vendors working around the clock to deliver upgrades that support new compliance requirements? Sure they are – but the problem is that most banks’ systems are a mix of different vendors’ solutions stitched together with significant customization. So even if a vendor’s upgrade is “compliant,” it will likely require further costly customization to implement. As this happens, many smaller banks may fall prey to an unsupportable “efficiency ratio” – the point at which the cost to generate each new dollar in revenue becomes too high to stay in the black. The solution is to put in place a banking infrastructure and process that can accommodate even unplanned-for change – and stay at least one step ahead of the sausage-makers.

In Part II, we’ll take a closer look at what that banking infrastructure and process should look like.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email stephen.higgins@adsfs.com to match you with the correct ADS resource for your needs.

But somehow, reality – the size and complexity of the undertaking, the high profile failures, the uncharted waters – has always gotten in the way.

With the Richter-scale changes the financial services has experienced in recent times, from the near-collapse of the industry in 2008 to the challenges posed by Dodd-Frank, a banking CIO could be forgiven for thinking they’ve all had more than their fair share of upheaval, thank you very much.

Yet, with every passing year, the need to evaluate the benefits of a core conversion only intensifies. As competition grows, regulatory requirements increase, and profit margins are squeezed, a major overhaul may be the most practical answer. Plus, with further consolidation and the growing maturity of newer IT models such as service-oriented architecture, the time may finally be ripe to get serious about core conversion.

The options are many, as we will discuss in future postings. But regardless of what solution you choose, there is one component you cannot do without: the consulting services of an independent third party with deep core conversion experience. With the stakes so high, it is unwise to place all your faith in a product vendor – no matter how well-meaning – whose loyalties could be divided between your success and their own. A partner like ADS – with our strong M&A methodology, an in-depth understanding of regulatory requirements, and the ability to lead the process of identifying, avoiding and/or resolving issues and opportunities every step of the way – has proven for over 30 years to be a very prudent investment in peace of mind and the best assurance of a successful integration project.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email peter.cahill@adsfs.com to match you with the correct ADS resource for your needs.

Dodd-Frank offers something for everyone: a new framework intended to bring greater stability to the U.S. financial system; a new regimen for the orderly liquidation of insolvent institutions; new consumer protections; new derivatives regulations; new SEC oversight powers; new insurance industry regulations; Federal Reserve System reforms; changes to the Internal Revenue code; and more.

Of immediate concern to most financial institutions is the bill’s effect on fee revenues. The Federal Reserve Board just released a proposal that calls for a rate of 7 to 12 cents per transaction on debit card interchange fees; according to one analyst, that’s an 80% to 90% cut in the “blended average” for current signature and PIN rates. To help banks explore new revenue opportunities, we at ADS have just published a new white paper, The Competitive Advantage of Next-Generation Enterprise Billing Systems.

Beyond the revenue impact, the sheer magnitude of Dodd-Frank has financial services IT professionals justifiably concerned. Most IT initiatives begin by defining the scope of work, but in this case, it is still difficult to gauge. In fact, the scope of work will continue to grow as the many studies mandated by the Dodd-Frank Act lead to more new regulations in the coming months and years.

The fact is, we will not know the ultimate impact of Dodd-Frank on banks or their IT organizations for quite some time. So what can financial institutions do now to at least prepare? At ADS, we think there are a few common-sense steps worth taking. In addition to monitoring communications from the appropriate regulatory bodies, it’s vital to engage early and often with your legal team to get their guidance on what kinds of capabilities and reporting your IT systems will need to support. It’s also a good idea to convene an internal Dodd-Frank team and hold regular meetings to explore all the issues and plot strategies.

The final piece of advice is to seek the insight and recommendations of an IT partner such as ADS. We have decades of experience navigating the ins and outs of regulatory compliance, from Sarbanes-Oxley to Gramm-Leach-Bliley, from Basel to BSA/AML and KYC. We understand what it takes to meet government mandates – and we have the project management expertise and hands-on resources to supplement your own internal team. Together, we can ease the impact of Dodd-Frank on your operations, your team, and your bottom line.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email peter.cahill@adsfs.com to match you with the correct ADS resource for your needs.

Some customers – like the giant inflatable Shrek and Spiderman characters – loom large in the business and demand a lot from your resources. They’re more susceptible to the winds of change. Yet, like a large balloon, their presence is bigger than their actual substance, in terms of revenue generation and profitability. 

Other customers are more like the marching bands. They’re disciplined, organized, and efficient. They deliver more than they demand. Their deposits are bigger and they contribute much more to your bottom line. 

When it comes to revenue generation and profitability, banks should be doing more to attract, reward, and retain marching bands. But unfortunately, most bank billing systems can’t distinguish the difference between a profitable customer and the banking equivalent of a giant, airborne Snoopy. This was less of an issue in the era of overdraft fees and free checking, but it has now taken on greater urgency. 

That’s why it’s refreshing to see a new generation of relationship-based pricing and centralized billing solutions coming to market. These solutions – which sit atop existing legacy systems and require no elaborate integration work – give banks the ability to do what most retailers have been doing for years: provide incentives and rewards to ring up more dollars from their most loyal customers. 

When you have the ability to target different groups of customers over different regions and assess different fees based on the relationship and client activity, you can drive significant revenue growth. You can do product bundling, dynamic pricing, and consolidated billing. And you can easily experiment with new ideas to see which ones work best. Results can be significant; just by gaining the ability to deploy differential pricing two European banks have increased revenues in certain areas by double-digit percentages. 

However, while the enabling technology to support these initiatives is proven and powerful, ultimately the burden of success rests on each institution’s ability to effectively use the tools provided. That includes doing the up-front work to identify opportunities, target specific market segments/regions, and coordinate the marketing and communications efforts they require. 

At ADS, we’re leading the parade to bring next-generation billing solutions to market, along with the expertise to leverage them effectively. Give us a call. It might be just the thing to generate new revenue – and prick your competitors’ balloons. 

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email stephen.higgins@adsfs.com to match you with the correct ADS resource for your needs.

Why the delay? The problem isn’t technological. The technology behind the idea – near field communication (NFC) – has been around for years. In fact, there are 25 million NFC-enabled phones in use today in Japan. Nor is the problem point-of-sale infrastructure; many retailers, including CVS and Best Buy, are now equipped with NFC-compatible payment terminals. Some observers blame the delay on the scarcity of commercially-available NFC-enabled mobile phones, but that situation is changing, with several models expected to hit the market early in 2011.

One of the biggest reasons for the lack of “e-wallets” in our pockets is the complexity of the business models, particularly here in the U.S. Even a simple NFC mobile payment business model involves chip makers, handset manufacturers, banks, credit card issuers, mobile network operators, and often government organizations – all of which have their own interests (which can sometimes conflict) and require a way to make money in the process. Japan has progressed further because it is a smaller market with fewer players.

Despite the delays, interest in e-wallets has not diminished. In fact, we are seeing a surge of activity in products and services that offer limited NFC-like capabilities. Companies such as First Data are offering prepaid contactless tags that consumers can stick on their phones and use to “wave and pay” at certain stores. Visa is testing mobile phone memory cards with built-in NFC functionality. While these interim approaches fall short of full NFC, they may help to both stimulate consumer interest and push the factions within the NFC “ecosystem” to work out the kinks in the U.S. business model.

Recently, yet another wrinkle appeared when Apple filed a patent application for a future iPhone. The illustration included with the application featured an iPhone sporting an “N-Mark,” the consumer symbol used by the NFC Forum, the industry consortium that advances NFC technology. A major commitment to NFC from Apple could be the accelerant that ignites the NFC market.

In the meantime, what’s a bank to do? Unless you’re willing to capture a first-mover advantage at any cost, our recommendation here at ADS is to continue watching the developments and weighing the pros and cons but be ready to move quickly when the winds of change reach hurricane force.As much as industry analysts may disagree on what the road to full NFC will look like, virtually all of them concur that the journey is inexorable and the final destination is clear.

At ADS, we see the growing use of smartphones and the popularity of “apps” as further proof that consumers will want their mobile phones to be the primary channel through which they interact with all aspects of their lives, including their banking and purchasing behavior. As the e-wallet comes closer to reality, we are building on our expertise in mobile and Internet banking to work with our customers to ensure that their mobile banking and payment solutions are robust, well-integrated with existing systems and secure.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email peter.cahill@adsfs.com to match you with the correct ADS resource for your needs.

Then the inevitable happens, the projects take on a life of their own. They grow into programs as naturally as a  teenager grows into adulthood. Somewhere along the way, you implemented an enterprise-wide Project Management Methodology. The programs continue to mature and grow and you now own portfolios of projects, which is pretty cool in terms of growth, but can be quite un-cool when the matrix organization, which is the structure of your ever blossoming project world, constantly collides with the functional organization that is the bread-and-butter backbone of your business world. If you’ve read this far and this isn’t resonating, then don’t bother reading on. On the other hand, if you are saying “Yes!” and nodding your head in agreement, then you may want to continue reading to learn  what we have to say about the rest of the story.

It continues like this….You roll along for a while, managing to keep some level of control and synergy between these organizational structures that co-exist within the enterprise. But slowly you realize this is easier said than done. You notice a slight, but steady, decrease in productivity across the board. Overtime is on the rise, employee turnover rates increase, there is a noticeable decrease in employee morale.

In the project world, deadlines and milestones are regularly missed, accountability seems non-existent and constant re-planning of major initiatives becomes the norm. All you are getting from your managers is excuses and finger  pointing and the cost to support all of this activity is on the rise. What’s going on? What triggered the general decline in performance and how long before it translates into a true loss on the balance sheet?

Those are worthwhile questions, but the reality is that most organizations are not taking the time to even notice these things, or if they do, they are not attributing the problems to the right causes. They feel some pain, but are unable to pinpoint the source. So what are the causes and what needs to be done to right the ship? Consider the following:

• Business Units in a traditional functional organization have always operated with a well defined set of goals and objectives that are long-term, usually customer oriented and profit driven, delivering a variety of services in multiple channels.
• Project organizations that overlay these business units operate under a temporary set of goals and objectives that exist only to serve the project at hand so the project can be successfully delivered on time and within budget.
• We expect these almost diametrically opposed groups to somehow work together knowing that in every single organization, regardless of size, they use many of the same resources to deliver results. Therein lies the rub.

We call on the same people in the business units who operate under one set of rules and expectations in their “day job” and we ask them to play a different role on a project, with different expectations, loyalties and deliverables within a temporary, yet overlapping timeframe. This is true, regardless of the type of role – be it analyst, manager, sponsor and so on. It doesn’t matter what the level of performance is – we ask people to take on two personalities. And the sad thing is that they do. Well guess what – having two personalities isn’t fun! In our everyday life it would be considered a mental illness and would require treatment. In the business world, it also needs treatment, but first it must be diagnosed.

This is just one example of the kind of issue we see every day in the conflicts between functional and project organizations. It’s not easy to make it work and that is why a certain kind of expertise is needed. It almost cannot be  solved within the organization itself and there is no “methodology” that can be applied after the fact.

At ADS, we’ve seen this many times. We understand the challenges and can help you create a more productive organization.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization.  Learn more about ADS Financial Services Solutions at www.adsfs.com or email peter.cahill@adsfs.com to match you with the correct ADS resource for your needs.