“Do what you do best, and outsource the rest.” Peter Drucker – Management consultant, educator, and author
Financial services businesses throughout the world are increasingly using third parties to carry out activities that the businesses themselves would normally have undertaken. Industry research and surveys by regulators show financial firms outsourcing significant parts of their regulated and unregulated activities. These outsourcing arrangements are also becoming increasingly complex. Outsourced activities include some aspects of IT support, sales, marketing, front office functions like cashiering, customer support, contact centers, security, cash collection, agency functions, etc. With the advent of remote working, some aspects of the information technology function has been outsourced, to take advantage of cheaper costs in some markets, especially with multinational companies. All these persons are working hand in hand with the regular staff, both virtually and physically to achieve the goals of the institutions.
Some Outsourcing Risks
- Reduced control
- Loss of innovation
- Reduction in organizational trust
- Eventual unanticipated higher costs
- Difficulty in knowledge transfer
- Reduction in confidentiality and intellectual property.
The following risks or problems are common with outsourced IT and other support functions and these pose many dangers to banks. These include:
- Choosing the wrong outsourcing model.
- Uncertainty about the vendor and possible lapses in control …
- Language and cultural differences.
- Differences in time-zones causing friction and lack of response to urgent issues.
- Ambiguous costs.
- Some vendors are never ready to transfer knowledge to their clients.
- Lack of expertise in some of the outsourcing tasks.
- Unfair negotiations causing some outsourced staff not to give maximum performance,
Let us look at some basic bank functions that are typically outsourced eg cashiering, customer service, some data entry functions, IT support, sales and mobilization functions. These are typically found in frontline operations.
The Frontline Operations
Many frontliners are trained to exhibit soft skills to ensure customers feel valued and patronize more services. However we find some bad nuts in the pack that cause reputational damage to the bank and eventually and facilitate customer exits. You may find some front liners working as if they are doing customers a favour. I will later attempt to examine some of the hidden factors causing some of them to be unprofessional in their attitude and service.
Do customers need to know that some of the staff have been outsourced? They are not interested. Banks are offering services to their customers. Who offers what service, is not their concern. They only need to receive the service as promised or as expected and off, they go.
Before I continue, permit me to mention some utterances of bank staff from the grape vine about the issue pf outsourcing. I have exaggerated some of them just for emphasis.
THE UTTERANCES FROM THE OPERATIONS GRAPEVINE
The above common utterances from the grapevine from both outsourced and regular staff is an indication that we need to manage communication and training in such a way that all stakeholders in the bank appreciate the objectives of an institution’s outsourcing policy and work better towards achieving a win-win situation. Today, outsourcing is increasingly used as a means of reducing costs and achieving strategic aims. However, outsourcing has been identified in various industry and regulatory reports as raising issues related to risk transfer and management. Among the specific concerns raised by outsourcing activities is the potential for over-reliance on outsourced activities that are critical to the ongoing viability of an institution, as well as its obligations to customers.
Despite the need to cut down on costs involved in payment of huge salaries and medical bills, it is the management of outsourcing process which is the crux of the matter. The need to blend the functions and the human relations among the outsourced and regular staff to enhance teamwork and achieve success, is critical. Next week, we shall examine other outsourcing risks and some tips on how the implementation of this strategic policy should not go down to affect the bottom line.
To be continued
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of Three books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story” and “The Modern Branch Manager’s Companion”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.
CONTACT
Website www.alkanbiz.com
Email:alberta@alkanbiz.com or [email protected]
Tel: +233-0244333051/+233-0244611343
