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Financial Services Firms Begin Work on Quality Standards
Financial “Test Case” Precedes
FS 9000 Development Work
Publisher’s Note: This article has been
reprinted with permission from THE
INFORMED OUTLOOK Newsletter,
April 2003 issue.
T
he financial services sector has
moved forward with plans to
develop a set of Financial Ser-
vices (FS) 9000 standards that will be
compatible and/or aligned with ISO
9001:2000.
Moving beyond the initial organiz-
ing committee first reported on in August
2002 (see “Financial Services Association,
Now FSIX, to Pursue FS 9000”, THE
OUTLOOK), a grass-roots, not-for-profit
association has been created with the
primary objective of developing standards
for process improvement within the
entire financial services sector.
The Financial Standards Interna-
tional Xchange (FSIX) believes that there
are some generic Business Management
Imperatives (BMIs)—the current work-
ing name for financial services sector-
specific adders—that will apply across all
segments of the financial services industry
(banking, insurance, securities, real estate,
etc.). These BMIs are expected to be
contained in a general sector standard, FS
9001, which will start with ISO
9001:2000’s requirements and make
specific enhancements through these
BMIs. In order to maximize the relevance
and value of the quality management
system (QMS) requirements to the differ-
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ent business environments involved in
the financial services industry, separate
and distinct standards will be created for
each of these individual domains that
may contain “sub-adders” that are unique
to specific segments and sub-sectors of
the financial services industry.
This approach will allow the FSIX
Standards Committee, responsible for
drafting the FS 9000 standards, to de-
termine whether a segment-specific
standard is warranted. At present, this
committee has seven members, includ-
ing four from financial institutions
(FIs). However, each individual standard
will retain the fundamental structure
and design of the “parent” FS 9000
global standard.
Having recently completed a gap
analysis of ISO 9001:2000 and addi-
tional quality management elements in a
financial services organization, the asso-
ciation has begun drafting requirements
and guidelines standards to address
sector needs identified in the implemen-
tation “test case”. FSIX will create “qual-
ity management standards” similar to
those found within the established ISO
9000 series, but the requirements and
guidance in these standards will be
specific to individual segments of the
financial services industry.
The FSIX effort will follow the
approach of similar initiatives—begin-
ning with the addition of supplemental
sector-specific requirements to ISO
®
9001’s generic QMS requirements—
that have been pursued successfully by
the automotive (QS-9000 and ISO
Technical Specification 16949), tele-
communications (TL 9000) and various
other industries.
According to Tom Taormina, Presi-
dent of Productivity Resources, LLC,
and Chair of the Standards Working
Committee, the FS 9000 series is fore-
seen as consisting of at least the follow-
ing standards:
● FS 9000—Quality Management
Fundamentals and Vocabulary for Fi-
nancial Services Organizations
● FS 9001—Quality Management
Systems Requirements
● FS 9004—Quality Management
Systems Implementation Guidelines for
FS 9001
“FS 9004 will be more robust than
ISO 9004:2000,” declared Taormina.
Figure 1 on the next page provides a
look at the proposed structure of the FS
9000 standards.
“We have been researching the need
for this standard for quite some time,”
noted Len Farano, FSIX Organizing
Committee Co-Chair, FSIX Standards
Working Committee member and Presi-
dent of Gambit II, LLC, a financial
services consulting firm. Farano, who is
the recently retired Quality Director for
Citigroup’s Emerging Markets sector,
added, “Our experience in successfully
implementing quality programs in the
banking industry over the years made it
evident that there is tremendous un-
tapped potential out there for financial
firms to make significant gains in cus-
tomer satisfaction and profitability, while
reducing operating risk through process
improvement and standardization.”
2 ✧ THE INFORMED Outlook Reprint: April 2003

What will FS 9001 provide to FIs
seeking to implement a QMS and seek
eventual registration? Taormina indi-
cated that the new standard will use
ISO 9001:2000 as a base, which will be
enhanced by combining the best fea-
tures of the Malcolm Baldrige Criteria
for Performance Excellence and adopt-
ing many of the key concepts espoused
by the Six Sigma approach. “The focus
of the new standard will be on building
guidelines that will enable financial
institutions to improve all aspects of
their financial performance, thereby
delivering improved bottom-line re-
sults,” explained Taormina, who has
written seven books on ISO 9000.
An aspect of the FS 9000 series that
will differentiate it from ISO 9000 and
the existing sector-specific requirements
aligned with ISO 9001:2000 will be the
ability of FIs to use a “tiered certifica-
tion” approach. This approach is similar
to one that is employed by the Capabil-
ity Maturity Model for software devel-
opment and management developed by
the Software Engineering Institute at
Carnegie Mellon. The Capability Matu-
rity Model for Software (CMM or SW-
CMM) is a model for judging the
maturity of the software processes of an
organization and for identifying the key
practices that are required to increase
the maturity of these processes.
Another differentiation from other
sector-specific QMS standards organiza-
tions is that FSIX intends to lead the
quality world in requiring consultant
certification, including provisions for

Figure 1. Proposed Structure of the FS 9000 Series

FS 9000
Fundamentals &
Vocabulary

ISO 9000:2000 Plus:

• Mission and purpose of the FS 9000
series of standards
• Applicability
• Quality Management System
philosophy as it pertains to FS
• Glossary of FS terminology

FS 9001 Published
Requirements Suite of
FS 9001-XX* Standards
Endorsements
ISO 9001:2000 Plus:
• FS Business Management Imperatives
(BMI)—added requirements for each Sector-specific endorsements of unique
element as needed requirements for specialties within:
• Exception criteria for ISO 9001 • Banking
requirements that do not pertain to FS • Insurance
• Real Estate
• Securities
FS 9004 * Example—Transfer Agencies would
Implementation be endorsed FS 9001-TA
Guidelines
New standard that includes:
• Applicable portions of ISO 9004, Quality
management systems—Guidelines for
performance improvements
• FS-specific implementation guidelines

Reprinted with permission from

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Volume 8, Number 4 THE INFORMED Outlook ✧ 3

control of conflicts-of-interest between spirit of the recommendations defined in this year in the development of the first
consulting and auditing service providers. each of the tiers in FS 9004. It is cur- elements of the FS 9000 standard
Within the FS 9000 series, registra- rently anticipated that there will be three within the FI environment,” remarked
tion will be based on conformity with tiers ranging from “fully compliant” to Terry Karaniuk, a Vice President of
FS 9001, which will provide generic “best-in-class”. Quality Assurance at PFPC and FSIX
QMS requirements that all FIs can Co-Chair. “FS 9000 will help the finan-
satisfy. But organizations will be able to FS 9001 Starts With a Test Case cial services industry develop require-
obtain higher tiers of certification by As Farano told THE OUTLOOK in ments for the best quality standards as
successfully incorporating additional August 2002, FSIX decided that the well as enhance PFPC’s initiatives to
practices into their QMSs that surpass drafting of the FS 9000 standards would provide superior service that exceeds
what the baseline FS 9001 requires. The not begin until the association had client expectations.”
additional practices for these different studied what FIs need their QMSs to Other financial services companies,
tiers will be present in FS 9004, a guid- include that ISO 9001:2000 does not such as BISYS, EurOrient, GMAC-RFC
ance standard that will be similar to ISO require or does not sufficiently address and SunTrust, are participating as Orga-
9004:2000, which provides QMS per- to meet the specific goals of the finan- nizing Committee members and are
formance improvement recommenda- cial sector. FSIX plans to identify which assisting with the development of the FS
tions. However, FS 9004 will provide additional elements to include in FS 9000 standards. “As one of the nation’s
performance improvement guidelines 9000 that will be most effective in a largest commercial banking organiza-
specific to financial services, and they financial services setting by using real- tions, we focus on our clients, employ-
will be organized into tiers that repre- life implementation projects. ees and business process as we develop
sent QMS performance levels beyond For its first implementation/stan- our core competencies,” emphasized
the baseline of FS 9001. dard development project, FSIX worked Jack Murphy, Vice President of Quality
“FS 9004 will also be entitled with PFPC, a subsidiary of The PNC Management at SunTrust.
‘Implementation Guidelines’, providing Financial Service Group (NYSE: PNC), “SunTrust has a long track record of
a uniform set of guidelines from which a mutual fund administrative services successfully managing the various as-
implementers and consultants can work,” provider. This effort, completed in pects of risk inherent in our business.
noted Taormina. How the FS 9000 tiered January 2003, enabled the first elements However, the definition of risk in bank-
certification will work is that an FI may of FS 9000 to be developed and evalu- ing has broadened considerably in re-
obtain registration to FS 9001 and then ated within an FI environment. cent years to the point where it now
earn further distinction by following the “PFPC is pleased to have assisted transcends some of our industry’s his-
torical organizational boundaries. We
see the benefit of having a financial
industry-accepted standard that will
About FSIX allow us to track our efforts to succeed
FSIX is a not-for-profit organization dedicated to improving the quality of opposite competitors using the same
financial services firms’ operations by developing ISO 9000-oriented guidelines and metrics.”
standards, facilitating a knowledge management repository of case “We have always focused on con-
studies and benchmarking performance data and specifying industry tinuous process improvement, setting all
segment-specific versions of QMS practices to achieve the deployment of our internal standards higher than the
of optimally relevant programs to serve the needs of the financial ser- industry norm,” stressed Nimish Bhatt,
vices industry. A primary objective of the group is to help manage and Senior Vice President of Fund Adminis-
reduce operations risk and ease regulatory burdens within key seg- tration and Financial Services at BISYS.
ments of the industry, particularly in response to global pressures and “We welcome the opportunity to par-
an accelerating evolution of the industry. FSIX’s approach combines the ticipate in any initiative that focuses on
best practices from multiple disciplines and programs, including the standardization and quality improve-
Baldrige criteria, Six Sigma and quality initiatives. In addition to FIs, ment, particularly given the new indus-
some of which are mentioned above, several financial industry service try requirements resulting from the
providers are members of the FSIX organizing committee, including ABS current regulatory environment, repre-
Quality Evaluations, Inc., Business Brainstorm, LLC, Excel Partnership, sented by such developments as the
Inc., Gambit II, LLC, i3 Management Systems and Productivity Re- Sarbanes-Oxley Act and the Anti-
sources, LLC. FIs interested in joining FSIX and participating in the FS Money Laundering regulations. We
9000 standards development activities are encouraged to contact FSIX want to be a key player in the creation
Marketing Director Charlie Garland, who is President of Business Brain- of any new standard concerning quality
storm, LLC, and can be reached by phone (212-535-2947) or e-mail management in financial services.”
(fsix@optimapartners.com). Visit FSIX’s web site (www.fs9000.com) for Bruce Roth, Senior Vice President
more information about FSIX, particularly the Frequently Asked Ques- of EurOrient, an investment banking
tions (FAQs) section. firm that has major interests in the

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4 ✧ THE INFORMED Outlook Reprint: April 2003

provision of funding for infrastructure
projects in western China, pointed out
the important role that FS 9000 will
play in international financial practices.
“We believe that FS 9000 will raise the
bar for all FIs that want to participate in
a global economy. It will increase cus-
tomer satisfaction while improving the
bottom line for the registered FIs, yield-
ing a win-win scenario for everyone.”
Roth believes that, once drafting of the
FS 9000 standards is completed, imple-
mentation of a QMS conforming to FS
9001 will enable an FI to reduce opera-
tional risk, increase its focus on meeting
customer needs and leverage the trust
that ISO 9000 has already built in the
Asian and European markets that
EurOrient serves. Use of FS 9000 will
thereby increase the attractiveness of
EurOrient as an investment bank.
What Is the Present Status of the FS
9000 Series?
Most FS 9000 efforts right now are
on FS 9001, which is being drafted by
the FSIX Standards Committee. Prelimi-
nary work on the drafting of FS 9001
has resulted in the drafting of three
sample BMIs, which are being reviewed
and modified by the Committee. The
three samples are:
● Continuity of Business
● Customer Focus
● Integrated Audit.
These draft BMIs cover three areas
of major concern that are common to all
financial services sectors. For example,
Continuity of Business involves risk
management, a critical issue for any
sector within financial services.
The FSIX Standards Committee
has completed approximately 80-90%
of the work on the three BMIs listed
above, which will be core elements of FS
9001, since the test case concluded in
January 2003. In addition, the working
drafts for the sections of FS 9004 that
will provide guidance for the three BMIs
are at various stages of completion, and
the “tiering” concept is being designed
for inclusion in FS 9004.
“We are focusing the drafting efforts
on the three sample BMIs, because we
want to use these samples when com-
pleted to engage more FIs in the review
and enhancement of these samples until
they are in a form that will be considered
acceptable for publishing as a new stan-
dard,” explained Farano. “In essence, the
current FSIX Standards Committee will
become the official FSIX committee that
has the responsibility and authority to
publish the actual standards.”
Farano indicated that this FS 9000
Standards Committee, when formed as
an official committee for this purpose,
will determine the methodology for
reviewing, modifying and approving
each draft. It is therefore still undeter-
mined how reviews will be conducted
and if other sources, such as ISO Tech-
nical Committee 176, will be asked to
review and comment on the drafts. He
also noted that, although it is difficult to
predict how long it will take to com-
plete the standards, the Standards Work-
ing Committee intends to have the first
three BMIs “completely accepted” by
the third quarter of 2003.
THE OUTLOOK will provide
ongoing coverage of developments in-
volving FSIX and the drafting of the FS
9000 series. ###

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