The FSA, in conjunction with the Bank of England (BoE), will inspect work carried out by third party companies, which are subsidiary operations owned and controlled by UK companies.
A spokesperson for the FSA said: “British financial firms must take reasonable care to control their affairs responsibly and effectively, with adequate risk management systems. In line with this, firm’s directors and senior managers are responsible for assessing and managing risks, including those related to outsourcing and offshoring.”
Mike Lazenby, chief executive of the Kent Reliance Building Society, which completes much of its back office processing offshore, welcomed the regulator’s move. He said: “We have been anxious to ensure we have the most stringent risk management systems in place to cover such issues as confidentiality, data protection, IT security and business continuity planning. The FSA acknowledges in its report that offshoring is not inherently more risky than outsourcing domestically, provided there is suitable risk monitoring.”
Phil Perry, director at ARK Financial Planning, admitted he would be sceptical of financial service firms that outsourced their operations abroad. He said: “We tend to find that when business is outsourced to another country, it adds to the delay experienced by the consumer. If you speak to someone based somewhere in the UK then the problem or query is often dealt with there and then, but using BPO adds to the time spent on the case. In addition to this, the standard of service provided does tend to slip, but there are not too many instances when you have to deal with firms, and their back office management, in another country.”
