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Outsourcing Risk Oversight Service

The regulations governing the oversight of outsourcing arrangements are covered by the FCA's Systems and Controls Manual particularly under section SYSC 8.1. This responsibility needs to be evidenced to satisfy that any functions that could be performed by an asset manager, where it has been outsourced, have the risks identified with suitable mitigations by having plans that should enable the business to continue to fully support customers in the event of severe service disruption.

Background

The regulators visited around twelve asset management firms to review their contingency plans and risk oversight evidencing as complying with SYSC 8 requirements in protecting their customers in the event of severe service disruption. Their findings led to the issuing of the 'Dear CEO' letter in December 2012 as the plans were felt to be insufficient. This highlighted the four possible options available to firms (Step in, Migrate, Bring in-house or Too Big to Fail).. The IMA formed working groups with both asset managers and service providers to form a collective industry response to the 'Dear CEO' letter. The outcome was a white paper with eleven 'Good Ideas' for firms to consider utilising these ideas where appropriate. These ideas covered areas such as oversight, exit plans, standardisation and improved evidencing of risk planning, all of which were recognised by the regulators as an appropriate approach. The key area that needed attention according to the regulators was the Service Continuity Planning with a workshop approach recommended as a healthy exercise for any organisation to consider, leading to enhanced plans.

The IMA's Good Ideas

The IMAs Good Ideas diagram

Outsourcing Risk Oversight - The ISC Service

  • We apply our expertise in creating and documenting service continuity planning and contingency provider planning to meet regulatory compliance of oversight responsibilities of SYSC 8.1.
  • We utilise the full understanding of the IMA 'Good Ideas' as we contributed to the White Paper so are well placed to advise firms on which would be the most appropriate for their operating model.
  • We apply the outcomes from the IMA joint working groups with the Service Providers where suitable.
  • We assess the contractual protection that a firm's outsourcing agreements give them and their customers with the suitability of clauses in respect of exit planning and protection of on-going service provisions.
  • We facilitate any workshops to identify the business critical functions and build or update plans to cover the possibility of service disruption.
  • We understand the contractual structures that exist between service provision areas and their parents, with indications of financial strength and market commitment. In addition we have in-depth knowledge of service providers' offerings, current developments and future roadmaps.

How can ISC's Framework Help?

How can ISCs Framework Help?

IMA White Paper on Outsourcing

ISC Outsourcing Risk Oversight Service Flyer