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Impacts of financial decisions
Choosing a Core Processing System for Your Financial Institution
Choosing a core processing system and vendor for your financial institution can be one of the most important decisions your management team will make. It affects virtually every aspect of your operations, and can directly impact your ability to grow, meet business objectives, and help your customers achieve their goals.
You need a vendor that can provide a viable, cost-effective, fully-tested system that results in better service, increased customer satisfaction, and reduced costs. The decision-making process typically involves three important phases.
Evaluate your needs
Begin by establishing a clear and consistent understanding of your key business objectives and most critical issues. Conduct internal interviews and hold team conference calls to understand your current business environment, contracts and cost structures, service expectations, future needs, and any concerns you may have with your current vendor.
At this stage, it is also important to identify your institution’s core capabilities and differentiators. Detail the opportunities and competitive threats in your marketplace. Consider how the proposed system will allow your institution to address these challenges. Review the benefits and drawbacks of an in-house system as well as an outsourced solution.
This is also the time to pinpoint your most critical IT and data security issues so they can be clearly defined in the request for proposal (RFP).
RFPs and due diligence
An RFP outlines the requirements and expectations you explored in the evaluation phase. It is a critical communication tool for the vendors that you include in the selection process. Unless there have been significant issues with an existing vendor, you will want to give them the opportunity to submit a proposal. You’ll receive the best proposals when your RFP clearly defines your selection criteria and expectations.
Responses to your RFP should be analyzed carefully to determine if they meet your business objectives, pricing expectations, and functional requirements. For those that meet your needs, due diligence should include reference checks as well as other research that verifies the quality of service, response time, financial information, and history.
Contract review and negotiation
A well-negotiated contract is an important tool for ensuring a long-lasting relationship with a vendor. With the assistance of your financial advisor and legal counsel, review the contract language carefully to ensure that a comprehensive package is being offered with acceptable contract terms and conditions. Pay close attention to security and risk management issues, and make sure you understand service agreements. You should also consider ancillary applications, backup and recovery services, account management, and technical support.
Periodic performance reviews and service level agreement tracking will help you determine whether the existing contract is meeting your needs and should be renewed, or if you will need to begin the process again.
How we can help
CliftonLarsonAllen offers a full range of support and strategic guidance to assist in choosing vendors and systems. We can work on your behalf to secure strong terms, service level agreements, and the best possible rates.