Outsourcing
Although financial institutions have high quality operations, their differentiation actually comes from front office activities - sales, marketing, deal-making and trading.
Downstream operations are typically non-core and are high volume / high repetition, which is why they lend themselves to being outsourced. Until recently this has meant mainly IT functions, but banks are increasingly sending out their HR, finance, and settlements operations.
In a highly-regulated market, compliance with a plethora of regulations and standard procedures means that the costs of processing are very high. Using 3rd parties to deliver these non-core services has allowed banks to enjoy economies of scale in processing which they could not have individually achieved.
It is generally accepted that a very large proportion of outsourcing projects fail to deliver the expected benefits. Common wisdom suggests that this is usually because either the expectations were poorly set in the first place, or because the projects were badly managed.
In practice, the regulatory environment in which banks must operate is especially onerous when it comes to outsourcing. Both the FSA and BIS have specifically addressed the topic of outsourcing with guidance notes, and the EU's MiFID directive has plenty to say on the subject, placing many generic burdens of responsibility on banks.
The risks to a bank or securities house are severe; operational, regulatory, reputational and financial risks. For example, any element of operations which is outsourced must be capable of being in-sourced again at some future date, or at least amenable to re-tender and swapping suppliers. The BIS cite an example where a poorly constructed outsourcing transaction resulted in a bank being taken to court by one of its regulators.
Consequently banks must rely on the advice of outside experts to guide them through both the complexities of executing an outsourcing transaction, and dealing with the consequent regulatory approvals.
Itech is a specialist consulting services firm. We work only with banks and financial institutions to manage the programme life-cycle of their outsourcing transactions. Our expertise in the financial services sector enables us to assist our clients with the increasingly complex set of challenges relating to achieving best results from their outsourcing initiatives and activities.
Quality Management System
Itech is determined to deliver assignments to a consistently high quality standard - it is our view that long-term success is predicated on achieving this. Consequently we have built a model of the lifecycle of a typical outsourcing transaction, and we are continuously working to develop new and improved methodologies and frameworks in which clients are engaged and assignments are attacked at each stage.
To understand more about our approach to outsourcing contact us on +44(0)20 7626 4444.