Many banking and financial services companies rely on software escrow to safeguard business-critical software essential to their operations. Software escrow has been a part of their business continuity plans for years, and may even be required by the FFIEC, OCC, and other regulators. However, as the COVID-19 pandemic continues to present new challenges — including undermining the stability of software vendors — vendor managers, IP counsel, and procurement leaders look to standardize and strengthen their approach to escrow and verification to ensure they are protected.
Some questions I frequently hear from our banking and financial services customers these days include:
As my team and I help our customers become more diligent in incorporating a standardized approach to software escrow and verification throughout their companies, I’ve reflected on how the pandemic increased this awareness and need. Here are some statistics and recommendations from industry thought leaders, along with my takeaways on how this impacts banks and financial institutions.
As Bankruptcies Rise, Make Sure you are Prepared
My view: As bankruptcies increase, evaluate the risk factors that could affect your software vendors. Are they small or unproven? What is their funding situation? Are they located in another country with different regulations? If you find yourself in a situation where your developer goes out of business, an escrow release of the software source code lets you continue with development in-house or keep a suddenly unsupported product running long enough to find and implement a replacement.
Increase Operational Efficiency Now, Rather than Later
At most financial services companies, automation through operational applications and technology typically leads to the biggest operational efficiency gains. Start to methodically work through your automation list, updating and reprioritizing as needed. See if you can start on 1-2 automation projects before the crisis ends. (Sage Intacct)
My view: Forward-thinking banks and financial institutions are planning a more consistent, structured escrow approach now. They want to have greater operational efficiency around their escrow processes, and leverage this across their business units.
Build Resilience for the Future
My view: Risk management around technology procurement is an important area to pay attention to for business continuity. Software escrow is only one piece of the puzzle, however, make sure your escrow agreements are effective and comprehensive to safeguard your technology investment.
COVID-19 has knocked us all for a loop. Words like “resilience” are used frequently, but you need to understand what this means for your business and create a plan to make it happen. Like most financial institutions, you probably already have escrow agreements in place to safeguard your business-critical software. Now is the time to evaluate your escrow agreements to make sure they are active, up to date, include all the relevant release conditions, have a frequent deposit schedule, and are verified for completeness and accuracy. Ensure all of your business-critical software is covered and coordinate between business units for efficiency and cost-effectiveness. We will get through this … but it is important to put an action plan in place to come out ahead of the crisis.