inside quality standards: financial “test case” precedes fs 9000 development work | ron nechemia

8/8/2019 Inside Quality Standards: Financial Test Case Precedes FS 9000 Development Work | Ron Nechemia

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Financial Services Firms Begin Work on Quality Standards

Financial Test Case Pr ecedesFS 9000 Development Wor kPublishers Note: This article has beenreprinted with permission from TH EINFORMED O UTLOO K Newsletter,

April 2003 issue.

T he financial services sector hasmoved forward with plans todevelop a set of Financial Ser-vices (FS) 9000 standards that will becompatible and/or aligned with ISO9001:2000.

Moving beyond the initial organiz-ing committee first reported on in August2002 (see Financial Services Association,Now FSIX, to Pursue FS 9000, THE OUTLOOK ), a grass-roots, not-for-profitassociation has been created with theprimary objective of developing standardsfor process improvement within theentire financial services sector.

The Financial Standards Interna-tional Xchange (FSIX) believes that thereare some generic Business ManagementImperatives (BMIs)the current work-ing name for financial services sector-specific addersthat will apply across allsegments of the financial services industry(banking, insurance, securities, real estate,etc.). These BMIs are expected to becontained in a general sector standard, FS9001, which will start with ISO9001:2000s requirements and makespecific enhancements through theseBMIs. In order to maximize the relevanceand value of the quality managementsystem (QMS) requirements to the differ-

ent business environments involved inthe financial services industry, separateand distinct standards will be created for

each of these individual domains thatmay contain sub-adders that are uniqueto specific segments and sub-sectors of the financial services industry.

This approach will allow the FSIXStandards Committee, responsible fordrafting the FS 9000 standards, to de-termine whether a segment-specificstandard is warranted. At present, thiscommittee has seven members, includ-ing four from financial institutions(FIs). However, each individual standardwill retain the fundamental structureand design of the parent FS 9000global standard.

Having recently completed a gapanalysis of ISO 9001:2000 and addi-tional quality management elements in afinancial services organization, the asso-ciation has begun drafting requirementsand guidelines standards to addresssector needs identified in the implemen-tation test case. FSIX will create qual-ity management standards similar tothose found within the established ISO9000 series, but the requirements andguidance in these standards will bespecific to individual segments of thefinancial services industry.

The FSIX effort will follow theapproach of similar initiativesbegin-ning with the addition of supplementalsector-specific requirements to ISO

9001s generic QMS requirementsthat have been pursued successfully bythe automotive (QS-9000 and ISOTechnical Specification 16949), tele-communications (TL 9000) and variousother industries.

According to Tom Taormina, Presi-dent of Productivity Resources, LLC,and Chair of the Standards WorkingCommittee, the FS 9000 series is fore-

seen as consisting of at least the follow-ing standards: FS 9000Quality ManagementFundamentals and Vocabulary for Fi-nancial Services Organizations FS 9001Quality ManagementSystems Requirements FS 9004Quality ManagementSystems Implementation Guidelines forFS 9001

FS 9004 will be more robust thanISO 9004:2000, declared Taormina.Figure 1 on the next page provides alook at the proposed structure of the FS9000 standards.

We have been researching the needfor this standard for quite some time,noted Len Farano, FSIX OrganizingCommittee Co-Chair, FSIX StandardsWorking Committee member and Presi-dent of Gambit II, LLC, a financialservices consulting firm. Farano, who isthe recently retired Quality Director forCitigroups Emerging Markets sector,added, Our experience in successfullyimplementing quality programs in thebanking industry over the years made itevident that there is tremendous un-tapped potential out there for financialfirms to make significant gains in cus-tomer satisfaction and profitability, whilereducing operating risk through processimprovement and standardization.

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What will FS 9001 provide to FIsseeking to implement a QMS and seek eventual registration? Taormina indi-cated that the new standard will useISO 9001:2000 as a base, which will beenhanced by combining the best fea-tures of the Malcolm Baldrige Criteriafor Performance Excellence and adopt-ing many of the key concepts espousedby the Six Sigma approach. The focusof the new standard will be on buildingguidelines that will enable financialinstitutions to improve all aspects of

Reprinted with permission fromTHE INFORMED OUTLOOK April 2003 issues

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their financial performance, therebydelivering improved bottom-line re-sults, explained Taormina, who haswritten seven books on ISO 9000.

An aspect of the FS 9000 series thatwill differentiate it from ISO 9000 andthe existing sector-specific requirementsaligned with ISO 9001:2000 will be theability of FIs to use a tiered certifica-tion approach. This approach is similarto one that is employed by the Capabil-ity Maturity Model for software devel-opment and management developed by

the Software Engineering Institute atCarnegie Mellon. The Capability Matu-rity Model for Software (CMM or SW-CMM) is a model for judging thematurity of the software processes of anorganization and for identifying the keypractices that are required to increasethe maturity of these processes.

Another differentiation from othersector-specific QMS standards organiza-tions is that FSIX intends to lead thequality world in requiring consultantcertification, including provisions for

ISO 9000:2000 Plus: Mission and purpose of the FS 9000series of standards Applicability Quality Management Systemphilosophy as it pertains to FS Glossary of FS terminology

FS 9000Fundamentals &

Vocabulary

FS 9001-XX*Endorsements

FS 9001Requirements

FS 9004Implementation

Guidelines

ISO 9001:2000 Plus: FS Business Management Imperatives(BMI)added requirements for eachelement as needed Exception criteria for ISO 9001requirements that do not pertain to FS

New standard that includes: Applicable portions of ISO 9004, Qualitymanagement systemsGuidelines forperformance improvements FS-specific implementation guidelines

Sector-specific endorsements of uniquerequirements for specialties within: Banking Insurance Real Estate Securities

* ExampleTransfer Agencies wouldbe endorsed FS 9001-TA

PublishedSuite of

Standards

Figur e 1. Pr oposed Str uctur e of the FS 9000 Ser ies


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control of conflicts-of-interest betweenconsulting and auditing service providers.

Within the FS 9000 series, registra-tion will be based on conformity withFS 9001, which will provide genericQMS requirements that all FIs cansatisfy. But organizations will be able toobtain higher tiers of certification bysuccessfully incorporating additionalpractices into their QMSs that surpasswhat the baseline FS 9001 requires. Theadditional practices for these differenttiers will be present in FS 9004, a guid-ance standard that will be similar to ISO9004:2000, which provides QMS per-formance improvement recommenda-tions. However, FS 9004 will provideperformance improvement guidelinesspecific to financial services, and theywill be organized into tiers that repre-sent QMS performance levels beyondthe baseline of FS 9001.

FS 9004 will also be ent itledImplementation Guidelines, providinga uniform set of guidelines from whichimplementers and consultants can work,noted Taormina. H ow the FS 9000 tieredcertification will work is that an FI mayobtain registration to FS 9001 and thenearn further distinction by following the

spirit of the recommendations defined ineach of the tiers in FS 9004. It is cur-rently anticipated that there will be threetiers ranging from fully compliant tobest-in-class.

FS 9001 Starts With a Test Case

As Farano told THE OUTLOOK inAugust 2002, FSIX decided that thedrafting of the FS 9000 standards wouldnot begin until the association hadstudied what FIs need their QMSs toinclude that ISO 9001:2000 does notrequire or does not sufficiently addressto meet the specific goals of the finan-cial sector. FSIX plans to identify whichadditional elements to include in FS9000 that will be most effective in afinancial services setting by using real-life implementation projects.

For its first implementation/stan-dard development project, FSIX workedwith PFPC, a subsidiary of The PNCFinancial Service Group (NYSE: PNC),a mutual fund administrative servicesprovider. This effort, completed inJanuary 2003, enabled the first elementsof FS 9000 to be developed and evalu-ated within an FI environment.

PFPC is pleased to have assisted

this year in the development of the firstelements of the FS 9000 standardwithin the FI environment, remarkedTerry Karaniuk, a Vice President of Quality Assurance at PFPC and FSIXCo-Chair. FS 9000 will help the finan-cial services industry develop require-ments for the best quality standards aswell as enhance PFPCs initiatives toprovide superior service that exceedsclient expectations.

Other financial services companies,such as BISYS, EurOrient, GMAC-RFCand SunTrust, are participating as Orga-nizing Committee members and areassisting with the development of the FS9000 standards. As one of the nationslargest commercial banking organiza-tions, we focus on our clients, employ-ees and business process as we developour core competencies, emphasizedJack Murphy, Vice President of QualityManagement at SunTrust.

SunTrust has a long track record of successfully managing the various as-pects of risk inherent in our business.However, the definition of risk in bank-ing has broadened considerably in re-cent years to the point where it nowtranscends some of our industrys his-torical organizational boundaries. Wesee the benefit of having a financialindustry-accepted standard that will

allow us to track our efforts to succeedopposite competitors using the sameguidelines and metrics.

We have always focused on con-tinuous process improvement, setting allof our internal standards higher than theindustry norm, stressed Nimish Bhatt,Senior Vice President of Fund Adminis-tration and Financial Services at BISYS.We welcome the opportunity to par-ticipate in any initiative that focuses onstandardization and quality improve-ment, particularly given the new indus-

try requirements resulting from thecurrent regulatory environment, repre-sented by such developments as theSarbanes-Oxley Act and the Anti-Money Laundering regulations. Wewant to be a key player in the creationof any new standard concerning qualitymanagement in financial services.

Bruce Roth, Senior Vice Presidentof EurOrient, an investment bankingfirm that has major interests in the

About FSIXFSIX is a not-for-profit organization dedicated to improving the quality offinancial services firms operations by developing ISO 9000-orientedstandards, facilitating a knowledge management repository of casestudies and benchmarking performance data and specifying industrysegment-specific versions of QMS practices to achieve the deploymentof optimally relevant programs to serve the needs of the financial ser-vices industry. A primary objective of the group is to help manage andreduce operations risk and ease regulatory burdens within key seg-ments of the industry, particularly in response to global pressures andan accelerating evolution of the industry. FSIXs approach combines thebest practices from multiple disciplines and programs, including theBaldrige criteria, Six Sigma and qual ity initiatives. In addition to FIs,some of which are mentioned above, several financial industry serviceproviders are members of the FSIX organizing committee, including ABSQuality Evaluations, Inc., Business Brainstorm, LLC, Excel Partnership,Inc., Gambit II, LLC, i 3 Management Systems and Productivity Re-sources, LLC. FIs interested in joining FSIX and participating in the FS9000 standards development activities are encouraged to contact FSIXMarketing Director Charlie Garland, who is President of Business Brain-storm, LLC, and can be reached by phone (212-535-2947) or e-mail([email protected]). Visit FSIXs web site (www.fs9000.com) formore information about FSIX, particularly the Frequently Asked Ques-tions (FAQs) section .


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provision of funding for infrastructureprojects in western China, pointed outthe important role that FS 9000 willplay in international financial practices.We believe that FS 9000 will raise thebar for all FIs that want to participate ina global economy. It will increase cus-tomer satisfaction while improving thebottom line for the registered FIs, yield-ing a win-win scenario for everyone.Roth believes that, once drafting of theFS 9000 standards is completed, imple-mentation of a QMS conforming to FS9001 will enable an FI to reduce opera-tional risk, increase its focus on meetingcustomer needs and leverage the trustthat ISO 9000 has already built in theAsian and European markets thatEurOrient serves. Use of FS 9000 willthereby increase the attractiveness of EurOrient as an investment bank.

What Is the Present Status of the FS9000 Series?

Most FS 9000 efforts right now areon FS 9001, which is being drafted bythe FSIX Standards Committee. Prelimi-nary work on the drafting of FS 9001

has resulted in the drafting of threesample BMIs, which are being reviewedand modified by the Committee. Thethree samples are: Continuity of Business Customer Focus Integrated Audit.

These draft BMIs cover three areasof major concern that are common to allfinancial services sectors. For example,Continuity of Business involves risk management, a critical issue for anysector within financial services.

The FSIX Standards Committeehas completed approximately 80-90%of the work on the three BMIs listedabove, which will be core elements of FS9001, since the test case concluded inJanuary 2003. In addition, the workingdrafts for the sections of FS 9004 thatwill provide guidance for the three BMIsare at various stages of completion, andthe tiering concept is being designedfor inclusion in FS 9004.

We are focusing the drafting effortson the three sample BMIs, because wewant to use these samples when com-pleted to engage more FIs in the review

and enhancement of these samples untilthey are in a form that will be consideredacceptable for publishing as a new stan-dard, explained Farano. In essence, thecurrent FSIX Standards Committee willbecome the official FSIX committee thathas the responsibility and authority topublish the actual standards.

Farano indicated that this FS 9000Standards Committee, when formed asan official committee for this purpose,will determine the methodology forreviewing, modifying and approvingeach draft. It is therefore still undeter-mined how reviews will be conductedand if other sources, such as ISO Tech-nical Committee 176, will be asked toreview and comment on the drafts. Healso noted that, although it is difficult topredict how long it will take to com-plete the standards, the Standards Work-ing Committee intends to have the firstthree BMIs completely accepted bythe third quarter of 2003.

THE OUTLOOK will provideongoing coverage of developments in-volving FSIX and the drafting of the FS9000 series. ###

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inside quality standards: financial “test case” precedes fs 9000 development work | ron nechemia

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