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Operational plans should flow logically from the strategic plan. Management should review and revise them at least annually. Operational planning focuses on short-term actions and incorporates the annual budget process. Management should reference the strategic plans and adjust operational plans based on changes in the underlying business needs.
Operational planning addresses the near-term support for business operations. Specifically, operational planning focuses on immediate concerns such as adequate IT resources, sufficient budget, and appropriate risk identification.
Management should ensure that IT resources are adequate to meet the current operational needs of the organization. Operational planning should consider the adequacy of IT resources and the impact of any changes on critical business processes. Business processes are the integration of people, technology, and procedures used to accomplish a task or complete a transaction. Changes in business processes require coordination or alignment with the available IT resources. IT resources that require management coordination include:
Budgeting is another step in the operational planning process. The board should assess management's plans and its success in defining and meeting budgetary goals as one means of evaluating the performance of the data processing and operations management. The budget is a coordinated financial plan used to estimate and control the organization's activities. By assessing future economic developments and conditions, management creates an action plan and records changes in the balance sheet accounts and profitability (predicated on implementation of the plan). The budget not only projects expected results, but also serves as an important check on management.
Management, when considering new technology projects, should look at the entry costs of the technology and the post implementation support costs. Increasingly institutions are demanding, and vendors are providing, information regarding the total cost of ownership (TCO) beyond the initial entry costs. Technology projects often have undocumented costs including the resources required to configure, maintain, repair, support, upgrade, and manage the technology over its lifetime. Readily available TCO models, as well as historical data, provide management with tools to incorporate these hidden costs into the selection and budgeting process.
Some financial institutions budget IT as a separate department of the institution. A financial analysis of an IT department should include a comparison of the cost-effectiveness of the in-house operation versus contracting with an outside servicer. It may also include a peer group comparison of operating costs and ratios with a peer group of institutions. Depending upon its size and complexity, the institution may or may not allocate costs to the user departments. Where cost allocation exists, management should ensure equitable assignment of the costs to each user department. This is often accomplished by use of a chargeback system that records usage of resources based upon a performance metric such as Central Processing Unit cycles. In some instances, a separate subsidiary of the holding company manages the IT function. Ideally, an IT subsidiary of a holding company should have a positive affect on consolidated earnings performance. It can provide essential services at costs below external providers or individual financial institutions. However, some relationships may not result in a cost savings. To avoid a preferential arrangement with an affiliate, the contracts between the holding company or its subsidiary and the serviced financial institutions should ensure "arms-length" transactions. Institution management should assess these relationships to ensure they are fair and equitable to all parties. The IT Handbook's "Outsourcing Technology Services Booklet" has additional information on contract considerations.