A new FCA multi-firm review looks at how firms implement technology change, the challenges caused when changes fail, and steps firms can take to protect consumers from harm and disruption in the market.
Financial services technology is constantly updated, but when firms implement changes they don’t always go to plan. The coronavirus pandemic has also required firms to implement change quickly and move to new ways of working. Although many changes are successful, this review reveals that failed technology changes are one of the main causes for operational disruption within firms, accounting for a quarter of all high severity incidents that cause harm to consumers and the market.
We found that changes made by firms with strong governance and risk management strategies are more successful, that robust testing is an important part of the change process, and while testing automation has benefits it also presents challenges. We also found that pairing subject matter expertise with a clear understanding of a firm’s strategy is vital.
We know that firms must regularly upgrade their IT systems and while we do not expect changes to be implemented without incident, firms can work towards reducing the disruption caused, making themselves and the wider industry more resilient. And while the coronavirus pandemic has caused some delay to planned technology changes and system updates, it is very important for firms to understand how technology change activity can affect the services they provide, and invest in their resilience to protect themselves, consumers and the markets. This is especially important as firms increasingly use remote and flexible working.
The report intends to support discussions on how to reduce the frequency and severity of disruption due to technology change activity. Firms should consider the findings when assessing their future technology changes. This includes investing in technology to protect themselves, consumers and the markets.