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AIA

Offshoring brings benefits, despite risks

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9th May 2005
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Offshoring services to India by the finance industry can be bad for consumer confidence, and does nothing to reduce financial crime, according to a Financial Services Authority report published May 6. On the plus side, it notes that actual security risks are low, and India offers very many highly-qualified and motivated potential employees.

General findings from the report are that:

  • Achieving sufficient managerial control and oversight over operations is difficult and complex
  • Call centres suffer high levels of staff attrition
  • There are few "back-up" sites available, so business continuity presents a potential problem.
    • But more worryingly, the report concluded that off-shoring can also provide "a material risk to the FSA's objectives of market confidence, reduction of financial crime, and consumer protection."

      The survey, which explored ten firms in some detail, added that surveyed firms were aware of potential risks, and were taking appropriate actions accordingly. But it cautioned that all the firms participating in the report were "major groups" and that smaller operations would also be required to demonstrate the same degree of oversight from the United Kingdom.

      The FSA report was not entirely critical. It notes that while turnover of staff is high, largely due to the age-group of operators, there is "no shortage" of potential staff. "Headline" attrition figures largely relate to operations servicing U.S. customers, due to "extreme anti-social hours" worked. Other factors explaining high attrition rates are that female staff tend to leave employment on marrying, and that staff of both ages typically leave their jobs to pursue further education.

      A number of firms are taking measures to prevent high attrition rates, including exchange trips to the United Kingdom, organising social activities, and offering 'concierge' services such as booking theatre and travel tickets. Companies are also clamping down on "job-hoppers", and some contracts with third-party outsourcing providers include agreements specifying the risk of attrition.

      In addition to its analysis of the situation on the ground, the report also flags up the "political risk" posed by outsourcing in the U.K. It notes the media "backlash" concerning job security, and says that job security fears "could lead to poor performance and dissatisfaction" amongst U.K. employees of companies with outsourcing policies.

      The National Outsourcing Association has responded to the FSA report, noting, "If companies have had their fingers burned through offshoring, then the likelihood is that they leapt on to the offshoring bandwagon without having
      the correct procedures in place."

      In a statement, the Association noted, "'offshoring does not mean "out of sight, outof mind" and saving money into the bargain. Often the ante on management procedures has to be upped in offshoring environments - this doesn't mean
      that organisations will not be able to realise cost savings. It is just that they may not be as much as first thought."

      The statement continued, "Offshoring should not be considered a short-term profit margin boosting solution - it should be a considered a medium - long-term business process with every eventuality well-thought through."

      The FSA's report on off-shoring can be found at:
      FSA report offshoring report

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