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5 key criteria when evaluating your financial regulation managed services partner
02 December 2020
Institutions are facing narrowing margins and increased cost
pressures to manage their processes at a time when regulatory
scrutiny and the need for greater due diligence is increasing. In a
bid to enhance efficiency, operations teams are outsourcing
low-value, manual processes that don't differentiate their services
to external partners so that they can focus on the value-add
processes, such as risk assessments and reviews.
Operational efficiencies are a key driver in the adoption of
managed services, as operations teams seek to replace complicated,
cross-functional workflows with a centralized process led by a
managed services partner. The right managed services partner can
further centralize and streamline complex activities such as KYC
reviews or refreshes using data automation and web scraping
technologies that many organizations are unable to develop and
maintain internally without a significant and ongoing investment.
Some partners are further able to accelerate risk and regulatory
activities by conducting searches against their own extensive data
inventories.
The efficiencies gained by outsourcing these manually intensive
processes is considerable—and sometimes even transformative. In
IHS Markit's own managed services for risk and compliance teams, we
have been able to reduce the operational burden for our clients up
to 75%. The ability to hand off the vendor review processes has
reduced effort by 50% for business owners and 60% for SMEs.
But achieving these efficiencies means choosing the right
service partner. The quality of the service team, the underlying
technologies that support service delivery and many other factors
can impact the value that internal teams see from a managed
services engagement.
To identify a partner who can deliver the greatest benefit to
your organization in terms of enhanced efficiency, peace of mind
and value add, ensure that these five key considerations are
included in your evaluation of a managed services partner.
Data-enriched service delivery
Compliance requires the collection of extensive data and
documentation from reliable sources. As an example of the quantity
of data required for global KYC and onboarding activities, IHS
Markit maintains a proprietary fund dataset that covers over
230,000 active funds in addition to a data inventory that currently
includes over 50,000 validated KYC profiles and 40,000 vendor
profiles.
Managed services partners with access to robust datasets offer
their clients an advantage in terms of the accuracy and speed of
their KYC and onboarding processes. By including data resources as
a point of comparison between managed services vendors, you can
ensure that the service provider you select will be ready to
support greater agility and help you achieve your target operating
model.
Robust, interoperable technology
The technology that supports managed services is as important as
the skills and experience levels of the people on your outsourced
team. Make sure that the providers under consideration demonstrate
that they have invested, and will continue to invest, in a full
suite of technology solutions to support document exchange, data
automation and tax validation.
It's equally important to ensure that these technologies can be
integrated easily into your workflows and those of your
counterparties. Look for platforms that are API-ready so that they
can be connected to your own internal systems to facilitate the
transfer of information and ease the workflow. For situations where
API connections are not possible, providers should be able to offer
SFTP drop sites, data portals and VPNs to facilitate the flow of
post-review information and documentation into the client's system
of record.
Technologies built on open architecture support even greater
connectivity by enabling providers to connect to the client's
auxiliary service providers to enhance workflow speed and
coordination. The ability to establish a connection with a
screening provider's systems, for example, can create a swift and
seamless flow from AML review to screening to resolution to
completed KYC review.
Ability to scale and flex as required
One of the hallmarks of an effective managed services
relationship is the ability to expand, contract and adapt service
delivery based on the client's needs. Providers should be able to
support a flexible staffing model that includes onsite, offsite,
onshore or nearshore deployment. They also need to demonstrate the
capacity to support engagements of any size and scope, handle any
volume increases or transition from short-term projects to longer,
more permanent engagements, such as managing your tax validation
process or running your KYC refresh program.
Depending on your organizational needs, you may also want to
prioritize a provider that offers global coverage, multi-language
service delivery and around-the-clock support throughout the work
week.
Documented quality control processes
There is no room for error when it comes to regulatory
compliance and risk mitigation. A managed services provider should
be able to demonstrate the ability to deliver the highest levels of
oversight and quality control.
Make sure that service delivery staff undergo rigorous training
at the outset of each new engagement to provide them with a high
degree of familiarity with the nuances of your organization's
policies and procedures. Periodic refresh training should also take
place to ensure all feedback and subsequent changes are
communicated and reinforced across the broader team. End-to-end
project management should be overseen by a primary point of contact
to provide transparency and accountability.
For every service engagement, whether it's the delivery of KYC,
outreach or tax validation services, the process should involve
stringent quality control checkpoints staffed by subject matter
experts who can confirm that delivery teams have followed policies
and procedures. Further, those policies and procedures should be
clearly documented and made accessible to the client in order to
support their own internal review and any audit activities.
Rigorous security protocols
Financial services organizations need to maintain rigorous
security at all times, and those security standards extend to the
managed services providers they work with. A prospective service
partner should be able to demonstrate the highest levels of control
and oversight, including extensive background checks conducted on
each staff member who joins the service team. Ideally, the provider
will also be able to support the creation of a clean room
environment, including secure workstations in an access-restricted
environment, isolated and highly restricted network access, locked
printer and scanner access, prohibition of mobile devices and other
handheld devices and on-site video surveillance.
Service providers must further demonstrate that they submit to
annual SSAE Type II audits and a semi-annual attestation, including
an onsite visit by independent auditors. And as providers
transition to full or partial remote service delivery, it's
particularly important to find out how they are adapting security
protocols in order to ensure continued protections for their
clients.
The freedom to focus on what matters
Managed services can help risk and compliance teams delegate
non-value add activities so that they can focus on high-value
activities that contribute to the organization's reputation and
competitive advantage, but the selection of a service partner
requires careful consideration. Ensure that the provider you choose
can deliver the data resources, supporting technology, and
operational flexibility, control and security that support the
unique requirements of your organization and its regulatory
realities.
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.