FFIEC Guidance for Software Escrow

Re: Federal Financial Institutions Examination Council’s Risk Management of Outsourced Technology Services

This statement outlines the risk management process for financial institutions when outsourcing technology services. It emphasizes the importance of identifying, measuring, monitoring, and controlling risks associated with outsourcing arrangements. Financial institutions are encouraged to follow the guidance provided in this statement and the attached appendix to effectively manage relationships with their technology service providers.

As financial institutions increasingly rely on outsourced technology services to manage costs, gain expertise, and enhance customer offerings, they must also address the inherent risks associated with outsourcing. The guidance covers four key elements of the risk management process: risk assessment, selection of service providers, contract review, and monitoring of service providers.

Risk Assessment:

The board of directors and senior management are responsible for understanding the risks associated with outsourcing technology services. They should assess how outsourcing arrangements align with the institution’s objectives and strategic plans and evaluate the management of the service provider relationship. Risk assessment should consider strategic goals, regulatory requirements, contractual obligations, and contingency plans.

Due Diligence in Selecting a Service Provider:

After completing the risk assessment, management should evaluate service providers based on their operational and financial capabilities to meet the institution’s needs. Factors such as technical expertise, industry experience, security measures, and financial condition should be considered during the selection process.

Contract Issues:

Contracts between financial institutions and service providers should address business requirements, key risk factors, performance standards, security measures, and contingency plans. Contracts should be clear, detailed, and flexible enough to accommodate changes in technology and operations. Legal counsel should review contracts to ensure compliance and mitigate risks.

Service Provider Oversight:

Financial institutions should implement oversight programs to monitor service providers’ controls, performance, and compliance with contractual obligations. Oversight activities include evaluating financial condition, assessing quality of service, monitoring contract compliance, and maintaining business resumption contingency plans.


The appendix provides additional guidance on due diligence in selecting a service provider, including factors related to technical and industry expertise, operations and controls, financial condition, contract issues, and oversight of service providers.

In summary, financial institutions are responsible for implementing an outsourcing risk management process that includes risk assessment, due diligence, contract negotiation, and ongoing oversight of technology service providers. By following these guidelines, institutions can effectively manage risks associated with outsourcing and ensure continuity of operations while meeting regulatory requirements.

PRAXIS Technology Escrow offers a comprehensive solution that aligns perfectly with the needs outlined in the statement on risk management of outsourced technology services. Here are compelling reasons why PRAXIS Technology Escrow can effectively meet those needs:

Risk Assessment Support:

  • PRAXIS Technology Escrow assists financial institutions in conducting thorough risk assessments by providing insights into potential risks associated with outsourcing technology services. By offering a secure repository for critical source code and data, PRAXIS enables institutions to evaluate the impact of service provider relationships on their strategic objectives and regulatory compliance.

Due Diligence Facilitation:

  • When selecting a service provider, PRAXIS Technology Escrow acts as a valuable partner by facilitating due diligence efforts. By storing and verifying source code and critical materials, PRAXIS offers assurance regarding the operational and technical capabilities of service providers. This facilitates informed decision-making during the selection process and ensures that chosen providers meet the institution’s requirements.

Contractual Assurance:

  • PRAXIS Technology Escrow helps financial institutions address contract issues by ensuring that agreements with service providers include provisions for accessing critical source code and data in the event of service disruptions. By offering escrow agreements tailored to the institution’s needs, PRAXIS strengthens contractual assurances related to performance, reliability, security, confidentiality, and reporting.

Oversight Enhancement:

  • Through its escrow verification services, PRAXIS Technology Escrow enhances oversight capabilities by validating the accuracy and usability of materials held under escrow agreements. This ensures that financial institutions can effectively monitor service providers’ controls, conditions, and performance over time. PRAXIS’s escrow verification process provides valuable documentation for contract negotiations, termination issues, and contingency planning.

Business Resumption Support:

  • PRAXIS Technology Escrow assists financial institutions in maintaining business resumption contingency plans by offering secure storage and access to critical source code and data. In the event of service disruptions or termination of agreements, PRAXIS ensures timely access to materials necessary for continuity of operations. This helps institutions mitigate risks associated with dependence on external service providers.

Customized Solutions:

  • PRAXIS Technology Escrow offers tailored solutions to meet the unique needs of each financial institution. Whether it’s automated escrow for software source code or SaaS escrow for cloud-based applications, PRAXIS provides flexible options to safeguard critical assets. By offering customized escrow agreements and verification services, PRAXIS ensures that institutions have the necessary protections in place for their specific technology services.

In summary, PRAXIS Technology Escrow offers a comprehensive suite of services that support financial institutions in managing risks associated with outsourcing technology services. From risk assessment and due diligence to contractual assurance and oversight enhancement, PRAXIS provides the tools and expertise needed to navigate complex service provider relationships and ensure operational resilience.

Read the FFIEC guidance here: https://www.ffiec.gov/PDF/pr112800_guidance.pdf


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