Continuity in check image and lockbox processing

Today, Jun 2000

Disaster recorver

planning should go

beyond satisfying

regulatory compliance.

Now that imaging

makes alternative

processing capabilities

a practical part of

recovery systems,

experts advise that

advance planning

is vital.

Finding adequate disaster recovery solutions for lockbox or check image

processing operations has traditionally left managers few viable alternatives. Most agree that the ideal type of back-up would involve having a matched duplicate of hardware systems, so back-ups of software systems could be loaded, and operations at the alternate site would essentially duplicate those at the primary site.

Disaster recovery alternatives vary from paper tigers and excess processing capacity "guarantees", to well developed and reliable hot-site solutions. The EDP Examination Handbook, published annually by the OCC, is a good starting point for evaluating disaster recovery strategies. The EDP Examination states it very bluntly in chapter seven-Physical Security: "Hardware backup is the first step in contingency planning. All computer installations must make formal arrangements for alternative processing capability in the event their operations center becomes disabled."

Some minimum requirements for disaster recovery planning can be gleaned from the auditor's favorite reference by examining some of the recommended questions during an EDP audit:

Is the back-up system physically compatible with the primary system?

Is the back-up installation a reasonable distance away form the primary system?

Does the back-up installation have the resources and capacity required for timely resumption of processing operations.

Has the back-up installation been used or tested in the past year?

What operational elements were tested, and were they tested successfully?

Is there adequate off-site storage of software duplicates and key media?

Efforts at effective contingency planning should not be limited to satisfying regulatory compliance. Meaningful business reasons will have more impact on members of your organization and these should be carefully stressed. The ability of management to react affirmatively to a disaster directly impacts an organization's business partners and customers. The ability to quickly resume processing operations protects your organization and management from legal liability and damages awards. A reliable plan also protects strategic business relationships, and becomes a positive product differentiator.

Disaster Recovery Planning for Check Image Lockbox Processing

Most users of automated check image processing systems are responsible for tremendous amounts of capital transfer. For many large customer servicing companies, one could generalize that the entire business entity works towards a mutual goal that produces cash-flow received in the form of remittances. Effective disaster recovery planning is paramount to ensuring protection of strategic cash flows and critical customer processing services.

In high-volume lockbox processing, the critical task is maximizing funds availability without sacrificing accounting integrity, while keeping up with work volumes in order to minimize "hold-overs". Subsequent to depositing funds, the checks must be processed for acceptance by the Federal Reserve or your local clearing house organization. This process involves correct transaction accounting, processing, and encoding, with cash letter report generation for depositing the checks at the Fed on time or meeting local clearing house deadlines. No longer just the domain of banks, high volume transaction processing continues to be revolutionized by advanced image based software solutions.

Imaging technologies are creating new and meaningful business efficiencies by lowering transaction costs, improving customer service, and delivering a variety of unique corporate products. The success of imaging also underscores the importance of reliable disaster recovery strategies. In pre-imaging days, protecting two important elements, MICR/OCR document data and processed negotiables was the chief area of recovery planning focus. With the use of image technology, the image itself becomes another source of data, integral to maintaining operational integrity.

Image systems are usually LAN dependent and utilize multi-tasking operating systems for efficiently handling high document volumes. Previous disaster recovery solutions based upon reciprocal processing agreements are particularly at risk of failing in the image-enabled environment. Disrupting normal processes that your system was designed for in order to load a reciprocal's lockbox application would require a perfect match of application systems and the available capacity to meet processing deadlines. This is a big hurdle because there is so much site specific customization of processing applications, that virtually no two sites will have the same software vendor or features, etc. Beyond that, loading another's application onto your systems can create peripheral software driver conflicts that lock systems up. Other software and hardware related conflicts can cause data corruption in the primary users' image database. In addition, data confidentiality of customer information will be compromised since both parties would share the imaging systems. In essence, reciprocals are an invitation to create two disasters from one.