Outsourcing in financial services is increasingly popular these days as the business landscape for middle market executives becomes more competitive and complex. To keep up, business leaders are realizing they must focus their internal resources and attention on core competencies that drive innovation and improve the client experience.
While functions such as information technology, internal audit and regulatory compliance provide critical support to your strategy, handling them in-house can be costly, ineffective and inefficient, putting your organization at risk.
One of the main advantages of outsourcing these functions to a trusted, experienced partner is freeing up resources that possess excellent institutional knowledge to focus on strategic initiatives while often gaining world-class talent with both the depth and breadth to deliver excellent service.
Information technology
A growing reliance on technology that’s becoming increasingly complex has made it difficult for leaders to attract and retain the top IT talent they need. In addition, the number and type of security threats are growing. There are also increasing expectations by staff and customers to require 100% uptime and availability.
As a result, more leaders are turning to outsourced IT services to help them solve these issues. By the end of 2021, Statista reports, the overall value of outsourced IT services is expected to surpass $413.72 billion.
Where and when should you leverage outsourced IT services?
- Critical initiatives. Your internal IT resources can’t meet a strategic, high-urgency need within your institution or organization.
- Bottom up. A specific area of IT is underperforming, resulting in reduced IT efficiency and value.
- Top down. Cost issues prevent IT from addressing a specific need.
In what areas could you experience the cost-saving benefits of outsourcing?
- Infrastructure: highest average and median savings with a high confidence of success
- Application development: second-highest savings rate but highest variability in terms of outcomes
- Application support: similar to application development, with slightly smaller savings
- Help desk: lowest cost savings but also lowest variability and very stable
Benefits and advantages of outsourcing in financial services
As the proportion of IT budget committed to outsourced IT services increases, cost reduction ceases to be a top priority. Instead, business leaders can see the value of outsourcing in:
- Accessing deeper and wider skill sets
- Providing access to new strategies, best practices and career paths for in-house IT staff
- Reducing risk
- Gaining enterprise-grade solutions
- Improving overall IT delivery
Internal audit (IA)
The market for talented internal auditors is tight, with high demand and fierce competition. Specifically, business leaders are concerned with:
- A shortage of employees with specialized skills
- Rising labor costs
- A tightening, more competitive labor market
- Increasing organizational complexity
- Growing complexity of the regulatory environment and risk exposures, both domestically and internationally
- Expectations of stakeholders, including boards, shareholders, lenders, etc.
When to leverage outsourcing in financial services
Firms with in-house IA
Your organization has realized that attracting and retaining quality internal audit employees is a significant challenge. Potential consequences include:
- Internal audit falling short on execution
- Geographic expansion creating prohibitive travel expenses and/or language and cultural barriers
In addition, while you may have a significant need for IA capabilities, that need may not justify a full-time employee or one who works year-round. In this case, gaining access to fractional or seasonal personnel can be an excellent alternative. Outsourced services could help your business leaders supplement existing resources and extend your reach by co-sourcing with internal audit on a project-by-project basis, by geography or by critical skills.
Firms without in-house IA
Your organization has grown to the point where leadership can no longer monitor activities as closely as they’d like. Potential consequences include:
- Stakeholder concerns increase
- The company comes under scrutiny by a regulator
- There’s a lack of capacity or resources to maintain an in-house IA function
A partner such as RSM can provide an outsourced internal audit solution that includes planning, risk assessment, reporting and the tracking and resolution of issues using RSM’s state-of-the-art proprietary tools, methodologies and skilled dedicated professionals.
Benefits and advantages of outsourcing
Outsourced internal audit services can provide your business leaders with a perspective that may not be available within an in-house department. This knowledge and experience can lead to continuous improvement and best practices, including:
- Educating managers and employees about risk management and internal controls
- Going beyond traditional compliance auditing and accounting controls to handle such tasks as best practices review, key business processes and corporate governance
- Eliminating redundant controls from new systems and processes
- Analyzing performance gaps
- Interdependency and focusing on handoffs between “internal silos”
- Facilitating change
- Providing best practices information and benchmarking
- Assisting with integration activities of newly acquired entities
Internal audit software
RSM has developed a complete internal audit tool box called Auditor Assistant—a cloud-based, end-to-end software solution—that enables your internal audit team to do more with less, thus increasing efficiency and effectiveness across all your internal audit activities.
Auditor Assistant’s feature-rich functionality will allow your department to:
- Manage your audit activity
- Perform your audits collaboratively
- Communicate audit results and reporting
- Monitor the progress of your follow-up process
Regulatory compliance
Compliance with regulatory requirements and expectations can be a challenge for growing companies. Keeping up with new and changing financial regulations requires constant monitoring and a highly skilled technical workforce.
Why and when to leverage outsourcing in financial services
Many business leaders experience the advantages of outsourcing when they’re struggling to:
- Understand regulatory changes
- Address potential deficiencies identified through regulatory examinations
- Employ technology solutions and compliance management systems
- Respond to remediation
- Complete regulatory compliance audits
Regulatory services
RSM has the experience to address your information security and compliance requirements. These services are designed to provide advanced planning for regulatory changes, and our team has developed a proven compliance methodology and framework with a results-driven security approach.
- Ongoing advisory assistance
- Strategic and industry
- Technology
- Cybersecurity
- Regulatory and governance
- Annual assessments
- Information security program
- Information security risk
- Business continuity plan
- Vendor management
- Annual services
- Board reporting
- Business continuity exercise
- Incident response exercise
- Information security training
- Incident response training
- Pre- and post-exam assistance
Outsourcing in financial services: next steps and considerations
As your institution or organization gains a better understanding of how outsourcing in financial services could bring significant improvements to your financial services processes, there are two significant steps to take before you can begin:
- Assess your needs. This assessment should be an unbiased “quick hit” diagnostic evaluation to identify key initiatives that lead the way to improved business performance.
- Evaluate potential partners. The right outsourcing partner will help your company experience the full benefits and advantages of outsourcing. As you evaluate potential partners, pay close attention to their:
- Consider the breadth and depth of their experience, their reputation, etc.
- Determine what terms and hidden costs may be included.
- Ask about their experience and capabilities with proper data governance, data residency and NDAs.
The path to efficiency
The financial services industry is in a state of rapid change as new business models and new players arrive on the scene. Now is the time to focus on providing your customers with the best experience possible and to innovate to stay ahead of the competition.
With outsourcing in financial services, a trusted partner can handle these functions for a predictable monthly spend to support your institution’s growth strategy, allowing you to focus on your core business.
Before you enlist the help of a strategic partner, take our IT Risk Assessment to identify, quantify and prioritize the key risks affecting your operating environment and learn how an outsourcing solution can meet your needs today—and in the future.
