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Outsourcing Client Challenges

List of Challenges Our Clients Face in Outsourcing

The nature of outsourcing within the Asset Management space is varied and complicated. Entire operational groups within an organisation can be outsourced to Service providers e.g. Back Office Operations. Additionally, components of a process can also be outsourced, e.g. OTC derivatives pricing. One aspect that clients should consider when considering outsourcing are the rules applicable to different asset managers and the products offered. Managers of alternative investment funds must comply with the rules in the Alternative Investment Fund Managers Directive (AIFMD). Managers of undertakings for collective investment in transferable securities (UCITS) must comply with the UCITS Directives. Many fund managers also provide "investment services" and must therefore comply with the Markets in Financial Instruments Directive (MiFID). They must be aware of the EU measures and the UK rules implementing them.

What are the benefits of outsourcing that drive clients to embark on large scale business change? Cost is the main driver. Tapping into the economies of scale of a large service provider to drive costs down is a primary driver. These costs relate to the lowering of ongoing investment required for internal infrastructure, greater control of budgets, and reduction of investment to deliver to the changing regulatory landscape . Coupled to engaging a large service provider are additional benefits - better security, continuity management, quality of service. Other main benefits relate to risk control. Outsourcing allows less dependency on internal resources, the ability to focus on core functions and an increased flexibility to meet changing business conditions.

There are a number of pre-requisites ISC consider when engaging with a client considering outsourcing: Clear and comprehensive definition of the expected delivery; a benchmarking exercise - essential to measure against existing services and understand costs. ISC builds a picture of where the client currently stands and where it wishes to stand. Having established this information, the path to outsourcing should be far clearer.

There may well be equally compelling arguments against any sort of outsourcing arrangement. It is therefore important that ALL the issues are considered before embarking upon the outsourcing path. This assessment should take into account all factors, both local and generic.

ISC Outsourcing Capabilities