Anthea Coulter
Account Director, EQ Hazell Carr
Maintaining a balance between efficiency and effectiveness is an ongoing challenge for businesses. This is where the option of outsourcing comes in. Alongside a focus on operational resilience, the importance of maintaining a strong partnership with a trusted outsourcer was spotlighted by a recent FCA policy statement.
In this age of business accountability, the balance of efficiency and effectiveness is particularly important. Especially so for customer services and complaint handling. In these two areas, demand can fluctuate and a sudden need for remediation calls for swift action and resolution for consumers.
Organisations are under pressure to demonstrate commitment to customers and at the same time, they need to reassure the regulator and executive management.
In response to regulatory non-compliance, businesses must move quickly to remediate mandates and address any enforcement actions issued. But at short notice, these projects often need substantial resource. This poses something of a dilemma for the organisation. Should the Business As Usual (BAU) team be built upon? Or should remediation be outsourced to a third party?
Insular insourcing
A remediation team must be able to identify how products, services and processes need to be changed. They need to know how to provide redress to the affected customer population.
This demands specialist skill sets such as:
- Knowledge of regulatory requirements.
- Ability to demonstrate industry best practice.
- Knowledge of operational risk and information security.
- An understanding of how automated solutions can be used to improve workflow and task management.
- Great IT skills.
It’s the right combination of people, process and technology that makes for an effective remediation team.
Achieving this in-house can be challenging. It’s possible to build upon the BAU team by bringing in additional people with legal, regulatory and technological acumen. But it’s difficult to justify the investment. Admittedly, bringing these skills into the organisation gives the business ownership of the process, enabling it to respond to customer issues speedily, but the resource cannot scale to meet the needs of larger remediation projects.
Insourcing ultimately prevents the business from flexing to meet remediation demands. It saddles the business with unnecessary overheads and the maintenance of that resource. This includes the cost of ongoing staff training, the need for maintaining of remediation workflow solutions, the cost of technology that can age and depreciate, and the issue of resource; staff churn can see expertise lost.
Outsourcing provides flexibility
The alternative is to use a provider that can scale to meet demand and has the flexibility to offer what is needed. It may be an end-to-end independent project, an integrated BAU operation, or a fully managed end-to-end service. Outsourcing alleviates pressure on the internal BAU team and frees them to focus on their core competencies.
The external team then brings to the table a wealth of expertise. The outsourcing team may be comprised of qualified actuaries, auditors, bankers, consultants, or former regulators.
Every aspect of remediation, from compliance reviews to designing and simplifying business processes, can be outsourced. Teams are adept at performing business process analysis to spot bottlenecks and inefficiencies in the way departments and processes function. They will seek to develop and embed the appropriate systems, controls and processes using the very best workflow automation and complaint management tools. In this way, teams can generate a single customer view, automate workflow and payments processing, and integrate with business systems to provide reporting and analysis. This approach provides a robust and efficient solution.
Selection criteria
For most organisations, it’s simply not financially viable to keep either the range of expertise or capacity to undertake remediation programmes on a permanent basis. It makes outsourcing projects the most flexible and cost-effective option.
The issue then becomes how to go about selecting a suitable provider. Key questions to ask are:
- Scope: Can the provider meet the full gamut of requirements associated with the project from assessment to reviews and redress and payment processing? If the provider can meet end-to-end commitments this will prevent piecemeal delivery and reduce risk.
- Experience: Does the provider have the needed expertise? Does it have other clients in your sector? Does its regulatory knowledge enable you to deliver the right evidence of compliance? Can the provider demonstrate success in previous projects? Does it have the skillsets you need?
- Transparency: Is the provider able to provide you with deep-dive analytics? Can it provide actionable intelligence from the Management Information and Root Cause Analysis (RCA)? Does the remediation solution monitor for non-compliance going forward?
The FCA Handbook also contains some useful pointers under SYS 13.9 Outsourcing on how financial firms should critically assess the proposed remediation solution by examining:
- Suitability: How will the provider’s arrangement fit within the business and its reporting structure, overall risk profile and allow the business to meet its regulatory obligations?
- Risk: How will the agreements established with the provider allow the business to monitor and control operational risk exposure associated with outsourcing?
- Due diligence: Assess the provider on the merits of its financial stability and expertise.
- Handover: How will the business ensure a smooth transition of operations? Does it have an exit strategy for when the contract ends?
- Business continuity: Look at any conflicts of interest if the provider is used by several firms and any associated risk implications.
Once the organisation has worked through these criteria it should put in place a clear framework and Service Level Agreement (SLA) to ensure provision meets requirements. This will reduce risk. With SLAs in place, the business will have the support of a scalable resource. A resource that is the most cost-effective way to meet the challenge of remediation projects that are part and parcel of the regulatory landscape. A resource that is also fast becoming the only way to tap into the specialist skillsets and knowledge.
Ultimately, outsourcing brings many positive ways to balance efficiency and effectiveness whilst enhancing the customer experience.