Reciprocal agreements are common for financial institutions attempting to comply with FFIEC disaster recovery requirements without incurring major costs. A reciprocal agreement, according to FFIEC guidelines, is "an agreement whereby two organizations with similar computer systems agree to provide computer processing time for the other in the event one of the systems is rendered inoperable." While a reciprocal agreement with a partner branch or competing institution may look like a way to save costs, there are often consequences that can be exponentially more costly in the long run.
As a trusted disaster recovery service provider specializing in the banking industry, Recovery Solutions advises against reciprocal agreements for many reasons including risks to your reputation, potential loss of business, and possible noncompliance to FFIEC mandates. Here are a few key considerations:
- Should disaster strike and you are forced to resume business in a reciprocal facility, what would it look like through the eyes of your customers? They may be walking into a competitor's location for up to an entire year while you rebuild. Not only will customers get used to visiting a competing location, but they will see their promotions, loan rates, pricing, and fees. How will you be able to attract new customers in this environment?
- Will your staff be able to perform effectively? Will the reciprocal location have adequate space for your tellers, loan officers, and drive-thru customers? If space is limited it could affect your customer experience as well as the efficiency and information security of your entire operation. How will that affect employee morale and retention?
- If a natural disaster damages a significant geographical area, will the reciprocal location be damaged as well? What if your "backup plan" is gone altogether? With reciprocal agreements there is a risk of being without a place to serve your customers.
There are numerous important questions to ask when considering a reciprocal agreement.
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