2006-10-25 17:25:10天光雲影
Key Risks of Outsourcing
1.Strategic Risk
Major Concerns
◎The third party may conduct activities on its own behalf which are inconsistent with the overall strategic goals of the regulated entity.
◎Failure to implement appropriate oversight of the outsource provider.
◎Inadequate expertise to oversee the service provider.
2.Reputation Risk
Major Concerns
◎Poor service from third party.
◎Customer interaction is not consistent with overall standards of the regulated entity
◎Third party practices not in line with stated practices (ethical & otherwise) of regulated entity.
3. Compliance Risk
Major Concerns
◎Privacy laws are not complied with.
◎Consumer and prudential laws not adequately complied with.
◎Outsource provider has inadequate compliance systems and controls.
4. Operational Risk
Major Concerns
◎Technology failure.
◎Inadequate financial capacity to fulfill obligations and/or provide remedies.
◎Fraud or Error.
◎Risk that firms find it difficult/costly to undertake inspections.
5. Exit Strategy Risk
Major Concerns
◎The risk that appropriate exit strategic are not in place. This could arise from over-reliance on the firm, the loss of relevant skills in the institutions itself preventing it bringing the activity back in-house and contracts which make a speedy exit prohibitively expense.
◎Limited ability to return services to home country due to lack of staff or loss of intellectual history.
Major Concerns
◎The third party may conduct activities on its own behalf which are inconsistent with the overall strategic goals of the regulated entity.
◎Failure to implement appropriate oversight of the outsource provider.
◎Inadequate expertise to oversee the service provider.
2.Reputation Risk
Major Concerns
◎Poor service from third party.
◎Customer interaction is not consistent with overall standards of the regulated entity
◎Third party practices not in line with stated practices (ethical & otherwise) of regulated entity.
3. Compliance Risk
Major Concerns
◎Privacy laws are not complied with.
◎Consumer and prudential laws not adequately complied with.
◎Outsource provider has inadequate compliance systems and controls.
4. Operational Risk
Major Concerns
◎Technology failure.
◎Inadequate financial capacity to fulfill obligations and/or provide remedies.
◎Fraud or Error.
◎Risk that firms find it difficult/costly to undertake inspections.
5. Exit Strategy Risk
Major Concerns
◎The risk that appropriate exit strategic are not in place. This could arise from over-reliance on the firm, the loss of relevant skills in the institutions itself preventing it bringing the activity back in-house and contracts which make a speedy exit prohibitively expense.
◎Limited ability to return services to home country due to lack of staff or loss of intellectual history.
6. Counterparty Risk
Major Concerns
◎Inappropriate underwriting or credit assessments
◎Quality of receivables may diminish.
7. Country Risk
Major Concerns
◎Political, social and legal climate may create add risk.
◎Business continuity planning is more complex.
8. Contractual Risk
Major Concerns
◎Ability to enforce contract.
◎For off-shoring, choice of law is important.
9. Access Risk
Major Concerns
◎Outsourcing arrangement hinders ability of regulated entity to provide timely data and other information to regulators.
◎Additional layer of difficulty in regulator understanding activities of the outsource provider.
10. Concentration and Systemic Risk
Major Concerns
◎Overall industry has significant exposure to outsource provider. This concentration risk has a number of facets including:
- Lack of control of individual firms over provider; and
- System risk to industry as a whole.
Major Concerns
◎Inappropriate underwriting or credit assessments
◎Quality of receivables may diminish.
7. Country Risk
Major Concerns
◎Political, social and legal climate may create add risk.
◎Business continuity planning is more complex.
8. Contractual Risk
Major Concerns
◎Ability to enforce contract.
◎For off-shoring, choice of law is important.
9. Access Risk
Major Concerns
◎Outsourcing arrangement hinders ability of regulated entity to provide timely data and other information to regulators.
◎Additional layer of difficulty in regulator understanding activities of the outsource provider.
10. Concentration and Systemic Risk
Major Concerns
◎Overall industry has significant exposure to outsource provider. This concentration risk has a number of facets including:
- Lack of control of individual firms over provider; and
- System risk to industry as a whole.