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Working group issues recommendations on fund groups’ outsourcing

The Outsourcing Working Group has published a series of measures on how asset managers should carry out their arrangements with outsourcing providers.
The OWG consists of over 30 individuals from 24 organisations including the Investment Management Association, asset managers, outsourcing service providers and support from the big four accountancy firms.
Risks associated with the outsourcing of operational activities to external providers were first highlighted in the FSA’s ’Dear CEO letter’ to asset managers issued last year.
The recommendations by the OWG set out improvements for how firms oversee and protect ongoing outsourcing arrangements and when transitioning from one outsourcing provider to another.
The OWG suggests asset managers should carry out a risk-based assessment of outsourcing arrangements so as to understand the impact on the firm and the end client.
Asset managers should aim to have “appropriate in-house knowledge and expertise” of outsourced functions, with accountability for outsourcing operations also in place.
A comprehensive exit plan is also recommended by the OWG for if and when a firm switches between different outsource providers, to be monitored by the firm’s governance framework and reviewed periodically.
A standardisation of the terminology, documentation and testing processes would also help to smooth the transition between external providers, it adds.
Chase De Vere head of communications Patrick Connolly says: “Getting the right outsourcing arrangements in place is hugely important both from a day-to-day perspective but also from a reputational perspective if anything goes wrong as well.”


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