You and I were meant to fly
The rise of managed services
As financial institutions navigate today’s unpredictable economic and regulatory landscape, the pressure on risk and compliance operating models has never been greater. Adoption of managed services is rising as firms seek a more strategic response in order to better organise, operate, and safeguard their business.
Given that the adoption of managed services entails the transfer of a higher degree of control to a third party, determining when and how to adopt them is key. Get it right, and the potential rewards are significant.
Since the financial crash of 2007-2008, business models have faced extreme pressure from market, regulatory, and macroeconomic forces. As firms have felt the burn on revenue, cost, and capital, the focus on operational efficiency and effectiveness has sharpened.
Risk and compliance functions are by no means immune given soaring costs to meet the demands of regulatory compliance. According to Citigroup, the cost is US$270 billion annually—10 percent of the operating cost—across the banking industry. 1Much of this is due to a doubling of the size of compliance and regulatory teams in many of the biggest global banks,2 a trend replicated across financial services.
These resources are often tied up managing manual internal control processes, thus limiting their availability to address pressing risk and compliance trends. Many processes are supported by legacy systems beset by under-investment as firms move to a “one-system” strategy. Although new technologies such as automation and artificial intelligence could transform services, building in-house capabilities can be slow and commercially unviable. Finding people with the necessary skills and experience is just as hard.
1 Martin Arnold, "Banks' AI plans threatens thousands of jobs," Financial Times, 25 January 2017