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Earlier this year, the European Banking Authority (EBA) issued its Guidelines on Outsourcing Arrangements, which highlighted areas of risk to banks and other financial organisations, relating to outsourced contracts.
When we think of the potential risks of outsourcing, we tend to think about vulnerabilities that might lead to a cyber attack or breach. And of course, that’s true. But there are other risks that the EBA highlights.
“Institutions and payment institutions… should have robust internal governance arrangements that include a clear organisational structure,” the guidelines say. Those arrangements include “effective day-to-day management” of the outsourcing contract, and “sound outsourcing processes.” Outsourcing contracts need to be effectively regulated and monitored.
Typically, that’s done by humans, not automation. An outsourcing contract will be under constant review by a team of people who are responsible for making sure reports are done on time, SLAs are met, the correct incentives or penalties are applied and the right pricing put on invoices, business leaders are kept in the picture, and all specified goals and other obligations are met. These are all the things that keep the contract compliant.
How automation can make this process easier
For all of our creativity, ingenuity and imagination, people aren’t perfect. They occasionally miss report deadlines, miss a note system, or apply the wrong pricing. We just can’t remember everything on our to-do lists.
Set up all of the calendars, note systems and action lists that you like, something will probably end up slipping. And if that task involves a critical agreement in your outsourcing contract, which results in failure, the fallout could be serious. In short, processes that rely solely on people represent a significant risk for financial organisations.
Used correctly, automation can be a powerful tool to reduce this risk. Its memory is better, its process delivery more efficient. And it can free up capacity for people to focus on innovating and delivering the results that the outsourced contract was designed to support in the first place.
At the moment, four main areas of outsourcing management continue to depend on manual processes, which could be automated to reduce risk:
Automation is the tool that liberates a person from the task, freeing up capacity to innovate and deliver value. In this increasingly complex world of governance, applying automation brings a host of benefits far beyond simple efficiency. Our research shows that 15 to 20 percent of a sourcing deal’s value leaks because of poor governance that comes down to human error – obligations are missed, billing inaccuracies pervade and accountability blurs over time. But automation can take care of this burden.
The best businesses set up their employees to succeed, not to fail. Automation supports their success.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Jamel Derdour CMO at Transact365 - www.transact365.io
23 hours
Ben O'Brien Managing Director at Jaywing
07 February
Alex Kreger Founder & CEO at UXDA
Prakash Bhudia HOD – Product & Growth at Deriv
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