Core Banking Transformation A Roadmap to a Successful

Key reasons for new core banking solutions: • Legacy systems do not allow banks to manage the growth in business. • A disparate set of application components undermines the efficiency of the overall solution architecture. • Loss of competitive advantage. • Governance, risk and compliance issues. - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 2

Sponsorship and Stakeholders An effective and successful sponsor: • Ensures required documentation • Is involved in the solution selection process • Ensures management support for budgets and resources • Seeks cooperation of stakeholders • Ensures communications and meetings are result- and task-oriented • Monitors and resolve post-implementation issues • Provides direction and guidance from initiation to closure - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 3

Proposed Target Operating Model (TOM) TOM Advantages: • Provides a holistic view of the overall operations • Provides an IT governance model aligned business objectives • Improves processing efficiencies • Facilitates better operational risk management • Improves the return on investment - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 4

The Requirements Document Benefits of the requirement document: • Provides functional and technical requirements baseline • Common reference document for all stakeholders • If RFP, vendor’s response becomes an input for change management (Discussed later) • Highlights mandatory requirements • those mandatory items that are supported by the current system • those items that are not in the current system but are mandatory for the new system - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 5

Change Management • Changes are all-encompassing. • Processes, procedures, policies, controls, roles, service levels and business strategies will need to be addressed and involved in the project from the beginning. • User involvement with requirements definition and scope definition will help implement change. - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 6

Phased Implementation Approach Three Phases • Phase 1 - Applications operated with minimum integration. • Phase 2 - Mission critical or transaction processing applications • Phase 3 - Data warehouse applications, nonregulatory applications - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 7

Phased Approached Advantages • Helps realize the investment from stakeholder • Demonstrates progress by the project team and stakeholders • Increases acceptance from stakeholders • Better risk mitigation - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 8

Data Migration The bank must ensure: • A knowledgeable team and sufficient team members to the manage scope. • Appropriate Data cleansing/purging from source systems. • Data definitions of both the source and target systems should be documented. • The mapping algorithm is made. • Business user involvement is required. • Validation occurs by Business user group. • Test scripts are required at various stages of testing. - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 9

System Integration • Core banking solution comprised of several applications and interfaces. • Form an integration team for mapping end-toend processes. - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 10

Testing of the Target Solution To avoid pitfalls: 1. Allow sufficient time for testing. 2. Make certain acceptance criteria is discussed in detail. 3. Define clearly the entry and exit criteria for each testing cycle. 4. Ensure link between vendor’s software unit and the bank’s development servers. 5. Create numerous test cases and adequate testing cycles with sufficient time for review. 6. Plan stress and a performance tests in the production environment. - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 11

Testing of the Target Solution Cont. • Third-party testing vendors – Management must ensure: • The business users are involved • The testing company supplements the effort of the business users • The ownership of the testing phase and the eventual sign- offs • The bank’s staff does not lose out on the knowledge gained during the testing • The monitoring and control of the testing process work harmoniously - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 12

Production Stabilization Period • Production stabilization period • Post-implementation reviews, verifications, resolve issues • Review budget • No disruption to the regular operations • Involve the entire project team in post-implementation phase • Stabilization period for each phase of implementation - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 13

Conclusion Key steps in implementing a core banking system: • • • Sponsorship and Stakeholders The Proposed Target Operating Model (TOM) The Requirements Document Change Management Phased Implementation Approach Data Migration System Integration Testing of the Target Solution Production Stabilization Period - PMI Virtual Library | www. PMI. org | © 2008 Kannan S. Ramakrishnan 14