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Project Management Reduces Risk
Project Management Reduces Risk
By Stephen Stofanak
In April 2004, the Federal Financial Institutions Examination Council (FFIEC) published the latest Development and Acquisition Information Technology Examination Handbook. It provides guidance for examiners and financial institutions for controlling an organization’s ability to identify, acquire, install and maintain appropriate information technology systems. It notes that the process of acquiring IT systems includes numerous risks. The handbook describes common project management activities and emphasizes the benefits of using well-structured project management techniques. It states that financial institutions “should employ project management standards, procedures and controls commensurate with the characteristics and risks of their development, acquisition and maintenance projects.”
Project Management Integral 
As a bank grows, the number of changes being proposed and implemented will increase and the risk increases. The number of different people and departments responsible for and involved in the change increases. More changes require or should require technology, causing the cost of the change to become more significant, and most change has the potential to affect customers and revenue.
What once was simple when a bank was small has the potential of becoming complex and costly. Industry statistics indicate that 40 percent to 60 percent of information technology projects fail. Of those that succeed, further analysis indicates that better project management could have saved up to 30 percent of the project cost, and cut delivery times in half. As the number of variables increases, so does the risk, and so does the need for a process. Just as having a defined process for handling a loan application reduces risk, having an appropriate process for planning and executing change will reduce risk. Just as having a well-defined loan process produces predictable loan performance and business results, having a tailored change/project management process will produce predictable project performance and business results.
It’s a Business Process
The key is to establish project management (PM) as a business process that’s tailored to your bank’s specific needs. The FFIEC document presents PM as a methodology, i.e. methods, techniques and tools. Some methods should be applied to all projects; some only apply depending on the type of project. Banks need to do the work of converting the methodology into a business process that’s appropriate for its size, types of projects, number of projects, organizational maturity and amount and complexity of the technology.

Don’t wait until you have a significant project to define your project management process. A prudent approach to sound project management starts with small projects, and incrementally becomes more sophisticated as the projects expand. Just as every loan application is unique, every project is unique. Nonetheless, each individual loan application progresses through predefined phases with well-defined decision points. Projects should also progress through predefined phases with decision points. A way to demystify the 68 pages of the FFIEC handbook is to build your process around a proven project management life cycle. Within one such life cycle, projects start with management involvement and support, and proceed through the following phases:

• In the Commissioning Phase, senior management sets direction and identifies expected results.

• During the Definition Phase, the project team defines and clarifies purpose, goals and scope.

• In the Analysis Phase, the team performs detailed requirements analysis where needed.

• The Design Phase is used to design all the deliverables of the solution.

• During the Development Phase, the deliverables are created and tested.

• In the Implementation Phase, the solution is rolled out to the users.

• The Post-Op Phase is used to verify the solution and gather and share what’s been learned.

The labels for each phase define the work, and the conclusion of each phase is marked with a go/no-go decision. Now look through the FFIEC examination handbook and identify the items that fit under the phases listed above.

While the FFIEC focus is technology-related projects, you may have some non-technology projects that can also have significant risk and would benefit from following a defined process. Then again, just about every project will eventually affect technology. The next step is to identify the types of projects you normally do or expect to do over the next 12 months. This will help you define the type of information that needs to be recorded during each phase. Reusable templates can be created to guide team members through the details of each step.

A common electronic repository for the templates, by project, can provide cross-functional access to key project information and facilitate project tracking. With a project management process in place you can now ensure linkage between your strategic and business plan strategies and your key projects. The more this can be done in real time, the more easily you will be able to respond to business climate changes, their effects on your strategic objectives and projects, and business performance, and ultimately create competitive advantage.
The Bottom Line
The benefits that are attributed to following an appropriate process in the bank’s operational work can also be realized when it comes to a project management process. Not only will following a project process meet the FFIEC requirements, but it will also reduce project start-up time up to 80 percent, and overall time and cost up to 30 percent. Project benefits will be realized sooner, more projects can be handled in parallel with less conflict and risk will be managed more effectively.
One Bank’s Experience

“At Kennebunk Savings Bank, a good deal of our work is change work – adding servers, new software and changing processes. In most instances, having a defined project helps us to identify project requirements and potential problems like risk, time and personnel constraints, and conflicting interests or goals,” said Denise Butler of Kennebunk Savings Bank. “The project management process designed by TSI Systems is not only helping us meet regulatory requirements, but also reduces total project time and costs from start to finish. By addressing potential conflicts and developing the project details and requirements up front, we spend less time discussing projects and more time doing them.”         

Stephen Stofanak is president of TSI Systems Inc. in South Berwick, Maine. Contact him at (207) 384-1975 or TSI is experienced in helping financial institutions meet FFIEC project management requirements.

Posted on Thursday, September 30, 2004 (Archive on Wednesday, December 29, 2004)
Posted by kdroney  Contributed by kdroney


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