Oct 01 2020

The Bank Tech Checklist for M&A, Part 2: Refine the Roadmap

As financial firms move into the announcement phase of a merger, they must design (and refine) roadmaps for a smooth transition.

Mergers and acquisitions are on the rise. Even as financial firms and tech giants face the challenge of simultaneously bringing staff back to work and supporting those who prefer social distance, they’re seizing the opportunity presented by an economy in flux: the ability to acquire new assets at significantly reduced cost.

The challenge? M&A is complex in the best of times, and current COVID concerns make it more critical than ever to ensure mergers and acquisitions proceed as quickly — and seamlessly — as possible. In our first tech checklist for M&A in banking, we tackled preannouncement IT priorities, including the need to assess existing security and analyze current IT management.

But as your firm makes intentions public, what comes next? In part two of our M&A tech guide, we tackle the need for robust roadmap building across four key areas: new systems deployment, lifecycle planning, access control creation and the review of existing IT strategies.

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Prepare for New IT Systems

While some existing data systems and solutions are best left intact as mergers progress, banks must also articulate their plans to improve existing processes. This is especially critical during the announcement phase: Although stakeholders and clients may view the transition with cautious optimism, current conditions also make them understandably wary. As a result, banks must back up positive PR with clear plans for new system deployment.

According to research firm Deloitte, it’s worth considering a modular approach that evaluates IT capabilities on a function-by-function basis rather than all at once. By identifying key performance or security shortfalls in areas of data acquisition, use or visibility, firms can deploy purpose-built systems that address specific problems rather than purchasing generalized solutions.

While it’s possible to tackle this transition in-house, banks are often best served by partnering with financial IT service providers who have the industry experience and technical expertise to pinpoint key areas of improvement.

Manage the Lifecycles of IT Systems

As noted in part one of this series, it’s critical to evaluate the existing IT stack as mergers and acquisitions move from potential to probable. Once the announcement has gone public, however, IT teams must consider the long-term impacts of existing IT lifecycles.

It’s a key concern: According to The Verdict, banks in the UK now experience some type of IT failure each day that impairs client service. At scale, these failures could be catastrophic. As a result, IT teams must develop a plan for asset and data lifecycles that extend beyond merger start dates. Here, banks are best served by a proactive approach: If existing IT inventories show that systems with a predicted five-year lifespan are nearing their fourth year, the cost of replacement is preferable to the price of sudden system failure.

Considerations for Strong Data Protection

When acquiring a new asset or merging with an existing firm, it’s essential for IT teams to consider the three A’s of effective data protection:

  • Access: As noted by PYMNTS, financial M&A represents “uncharted cyber risk” for firms. As newly acquired systems and existing IT infrastructure combine, teams must deploy robust identity and access management solutions that ensure the right users have the right access to the right data.
  • Authentication: Robust authentication controls are critical to protect key assets. While two-factor solutions, such as one-time text codes, offer better protection than username/password combinations, multifactor tools that also account for geolocation and user behavior can improve overall protection.
  • Authorization: IT teams must also integrate systems that regularly evaluate current user roles and data authorization to ensure staff have access only to combined systems data storage when it serves their specific purpose.

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How to Better Manage IT Contracts and SLAs

Depending the systems and solutions banks choose to keep, existing software licenses and service-level agreements may no longer apply. While this is beneficial in some cases — because fewer contracts mean reduced complexity — there’s also the potential for gaps to emerge in IT service if contracts lapse for specific systems or software.

Here, IT teams must work closely with legal departments to create a comprehensive contract landscape that helps identify where current options can be extended, new agreements are necessary and existing frameworks can be terminated with minimal cost.

As M&A activity picks up, banks have the opportunity to acquire high-value assets at lower cost. But even as stakeholders expect a comprehensive transition framework that articulates both immediate returns and profit over time, there’s a commensurate need for robust IT roadmaps that prepare for new systems integration, predict IT lifecycles, prioritize data protection and define clear plans for IT contract management.

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