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Financial services firms risk outsourcing disaster



Guy Campos

Financial service companies are risking disaster by outsourcing too much expertise, according to a city...

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Outsourcing



Guy Campos

Financial service companies are risking disaster by outsourcing too much expertise, according to a city regulator.

Michael Foot, managing director and head of financial supervision at the Financial Services Authority (FSA), said he was concerned that firms were not employing enough staff to supervise outsourcing firms, making them unable to recover from a disaster. "If you outsource something, you, the company, remain responsible," he said.

The FSA has already published guidance on outsourcing. It requires companies to maintain sufficient expertise in-house and include a clause in agreements allowing the authority to inspect the outsourcing company.

Foot said, "We are not talking about duplication but we are against the mindless use of outsourcing."

Foot did not name the companies he was worried about but his comments follow problems at the London Stock Exchange, which has outsourced its IT to Andersen Consulting. The Exchange ceased trading for almost a day in April, after delays in overnight data processing prevented systems from functioning the following day.

Anthony Miller, an outsourcing specialist at IT market analysis company Richard Holway, was concerned that Foot's comments would herald a rigid approach to regulating outsourcing. "There are a range of outsourcing models from fee-for-service to risk-reward - that requires a spirit of the law approach," he said.

FSA guidance on outsourcing is available at www.fsa.gov.uk

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