FCA Implementing Technology Change Review

February 2021

FCA Implementing Technology Change review

In February 2021, the FCA published the findings from
their cross-Financial Services change management review,
which looked at how financial firms manage technology change,
the impact of change failures and the practices utilised within the industry
to help reduce the impact of incidents resulting from change
management.

This review follows an earlier FCA survey of firms between 2017 and 2018, looking at firms' technology and cyber resilience where they outlined that failed IT changes caused 20% of the operational incidents reported to the FCA, between October 2017 and September 2018.According to the Implementing Technology Change report, technology plays an integral role in the delivery of financial services and the FCA remain concerned over the number of significant IT failures in the last 10 years and the effectiveness of technology change management in the FS sector. Their analysis of the incident data firms reported shows that change related incidents are consistently one of the top causes of failure and operational disruption.Change successThe review highlights the following practices identified as contributing to change success:

Firms with well-established governance arrangements have a higher change success rate

Relying on high levels of legacy technology is linked to more failed and emergency changes

Firms that allocated a higher proportion of their technology budget to change experienced fewer change-related incidents

Frequent releases and agile delivery can help firms to reduce the likelihood and impact of change-related incidents

Effective risk management is an important component of effective change management capabilities

Change FailurePractices identified as contributing to change failure:

Most firms do not have complete visibility of third-party changes

Firms' change management processes are heavily reliant on manual reviews and actions

Legacy technology impacts firms’ ability to implement new technologies and innovative approaches

Major changes were twice as likely to result in an incident when compared with standard changes

Drivers of technology changeThe financial industry has needed to change quickly, and in some cases dramatically, as customers demand real-time services, seamless experiences and increased customer journey integration. Regulators have also required substantial change from the industry.

35,000

Average number of changes implemented per firm over 2019

To better understand the drivers of change, firms were asked to allocate their change budgets across six broad buckets. The FCA found that firms dedicated the highest proportion of their change resources to ‘maintenance and upkeep’ and ‘satisfying regulatory and legal requirements’.High risk projects and programmesThe FCA found that a number of consistent risk factors are prevalent in high risk change projects of all sizes. Firms across all sectors agreed that the most consistent risk factor is when ‘a project is dependent on other projects delivering their objectives’. These projects require the coordination of many moving parts, detailed awareness of the interconnectedness of systems and services, and changes needing to be completed in tandem to fulfil structured project plans.The review contributes to discussions surrounding Operational Resilience, and is intended to influence firms' implementation of technology change in ways whichreduce the potential for operational disruption.