Hello dear Readers, this week, I want to touch on a sensitive issue that has been nagging some banks recently – Managing outsourcing risk.
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.
I have watched an interesting trend of events within the last decade and wish to share some thoughts with you about the increased numbers of outsourced staff in cashiering, sales and front desk activities.
It is not as easy as it looks. Come with your binoculars and you will notice that in some institutions, all is not well. Even on the outer surface, you may find some front liners working as if they are doing customers a favour. Let me attempt some of the hidden factors causing some of them to be unprofessional in their attitude and service. Banks are now being compelled to adopt outsourcing as a policy for some activities for various reasons. These involve mostly sales, customer service, and cashiering. All these persons are working hand in hand with the permanent staff to achieve the goals of the institutions.
Do customers need to know that some of the staff have been outsourced? Obviously not! 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 and move on.
Before I continue, let me list some utterances of bank staff from the grape vine. I have exaggerated some of them just for emphasis.
How do you feel about the above utterances? For some of you, it is no big deal, while to some others, it is insightful. Whatever the case, it is to let you know that a leader’s listening ear, when it is sometimes “placed on the ground”, can decipher a storm or volcanic eruption coming along the path. I believe that revelations from the shop floor can alert both management to review the outsourcing policy of their banks.
The above common utterances from the grapevine 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 both 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.
Questions to Ponder
Once again, please permit me to ask a few questions in respect of your banks outsourcing programs:
- What are the objectives of the outsourcing policy?
- Did the cost-benefit analysis of the scheme factor in other related costs like regular training, mentoring and coaching to bring the outsourced personnel up to, or even exceed the level of the existing staff?
- Were the existing staff communicated to about the advantages of outsourcing, and eliciting their support and cooperation with the new staff?
- Was it a sudden implementation that threw the human relations aspect of the transition period into the air, making existing staff feel threatened?
- Was it a “take it or leave it” attitude making existing staff feel useless?
- Were unit supervisors and branch managers pre-informed to prepare training and coaching lessons for the outsourced staff?
- What is the impact of your Human Resource or Training Departments on the outsourced staff?
- Is the orientation program adequate enough for the outsourced staff to appreciate the bank’s corporate culture?
- Does the outsourced company have a good working relationship with the bank, but treats the outsourced staff as “tools in trade”?
RECOMMENDATIONS
So far I have concentrated on outsourcing risks on the bank’s shop floor. Even though there are many schools of thought with regards to certain core activities now being outsourced in some banks, the balancing of the risk and return is still key.
It is never too late to make amends. Whatever happens, outsourcing is a global phenomenon. Management of the effects of outsourcing is very important. Bankers can best perform while doing their core business. Every other activity should also be critically monitored to ensure no losses are incurred, and if any, barely negligible.
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
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