The testing of trading systems and other financial technology infrastructure components is not up to snuff, and the cost of adequate checking of these systems is the main culprit.
That’s the consensus from a survey from financial technology provider SunGard, as respondents noted that they are increasingly concerned about possible systems failures and glitches in today’s highly sophisticated trading environment.
SunGard polled 354 COOs, CIOs, project managers, IT managers and quality/test managers in late 2012 and summer 2013. Survey participants represented primarily insurance, retail banking, commercial banking and capital markets organizations in the United States, the United Kingdom, Ireland and the Middle East.
According to the survey, cost represented the single biggest challenge for survey respondents, followed by insufficient time to meet deadlines, incomplete or ambiguous requirements and insufficient resources. For 23 percent of respondents, the cost of testing exceeded a quarter of a project’s entire budget.
Furthermore, nearly three in five or 60 percent of respondents said that budget restrictions impeded the improvement of the testing process.
“Testing has become a crucial part of any financial institution’s operations. Regulatory pressures and client demands are driving them to do more things faster and with fewer resources,” said Stephen O’Reilly, quality assurance practice lead, SunGard Consulting Services. “At the same time, software failures can cost financial institutions dearly in terms of loss of business and reputation.
While survey respondents agreed that testing is crucial to maintaining performance, satisfying customers and meeting compliance demands, the cost is a growing concern for financial institutions.
As has been proven in the last two years, trading glitches and technology failures such as those at the Securities Industry Processor, Knight and other firms have underscored the need for smooth implementation of upgrades or new technology. Failure to properly test technology, however, has resulted result in outages and downtime that have caused firms to either lose business, cause reputational damage or even force firm’s to close.
SunGard’s survey also noted that three out of four survey participants or 75 percent said that having a testing operation underway has a medium-to-high impact on normal business processes and operations. Perhaps as a result the vendor noted, nearly three out of five survey respondents of 60 percent indicated there is an appetite within their organization to improve testing processes.
Driving the need for improved testing is the constant state of new product introductions into themarket, as well as growing regulatory scrutiny. When respondents were asked to name one or more factors influencing improvements in testing, 50% of survey respondents cited the introduction of new product and service offerings and 45 percent cited regulatory requirements.
Of the regulations driving increased focus on system testing, Basel III is the most prominent, the survey reported. Forty percent of those who saw regulations as a driver cited this international standard as boosting the need for improved system testing. Aside from general banking requirements, local regulations were the next strongest drivers, including SEPA, FATCA and the Consumer Protection Code.
Institutions are relying heavily on their own staff to perform testing, as the survey reported 43 percent of respondents indicated that they employ internal testers who are industry trained. However, 32 percent rely on untrained internal personnel or line-of-business resources.
Nearly three quarters of respondents reported having ten or fewer test personnel, And SunGard said that means that the strain of managing today’s complex IT environments is typically being met by limited resources.
