Industry issues outsourcing principles to address regulator's concerns
An industry-wide Outsourcing Working Group (OWG), which was set up to address the concerns highlighted in the FSA's Dear CEO letter on outsourcing last year, has today published practical measures for asset managers to improve the oversight and resilience of their outsourcing arrangements.
The 'Guiding Principles' cover three areas:
• Oversight
o Building a full understanding of the scope, nature, locations and contractual terms of their outsourcing arrangements in order to effectively manage and oversee the relationship with their service provider
o Conducting a risk-based assessment of outsourcing arrangements to understand the impact on the firm and the end client
o Establishing an appropriate level of ownership at a senior level for the outsourced activities
• Exit Planning - the process of transitioning from one outsourcing service provider to another should include:
o A comprehensive exit plan
o Oversight by the asset manager's governance framework
o Periodic review of the exit plan
• Standardisation - having standard terminology and documentation, data interfaces and testing processes by outsourcing providers will help with transition management from one outsourcing company to another.
The OWG comprises over 30 individuals from 24 organisations including the Investment Management Association (IMA), asset managers, outsourcing service providers and support from the big four accountancy firms (Deloitte, EY, KPMG, PwC). In rallying around this collaborative effort, the OWG members recognise there is little competitive advantage to be gained by tackling the issues individually and this spirit of collaboration has been a hallmark of the OWG’s approach.
