FSA highlights offshoring risks

Offshoring represents a ‘material risk’ to market confidence, reduction of financial crime and consumer protection, according to a new report by the Financial Services Authority.

The analysis of 15 financial services firms with offshoring operations found that maintaining management oversight and ‘control from a distance’ was the biggest problem they faced in keeping risk manageable.

Other areas of risk identified in the report included staff attrition in India, which is high at the moment and could impact service provision. Business continuity planning is another factor that offshorers need to ‘increasingly monitor’, especially when new processes and functions are migrated.

However, the FSA said that ‘most’ companies documented all their processes when dealing with a migration of processes, which enhanced these companies’ understanding of their work in offshore locations while improving their processes in the UK.

Martyn Hart, chairman of the National Outsourcing Association, said that the FSA publication was just ‘half a report’.

‘The FSA is looking at “steady state” operations that are up and running. But there are higher risks in the implementation of offshoring.’

Hart added that it was obvious that there were more risks involved in offshoring than running processes in-house.

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