India gets the green light from the FSA |
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Published
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Sun, 08 May 2005 07:00
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As many UK based companies are looking to outsource a substantial part of their operations offshore, particularly to India, but were concerned about the safety of their customer data, the UK’s regulatory body, the Financial Services Authority (FSA) visited and reviewed some outsourcing operations in India. Although the FSA has presented a mixed report, it has given more points in favour of outsourcing operations in India.
The FSA investigated the largely security-related issue by visiting 10 outsourcing operations in India. Besides these, another five had contributed inputs for FSA’s review. The ten firms visited were either captives (wholly-owned subsidiaries of UK-based principals) or external suppliers. The objectives of the review were to determine the efficiency of governance and data control systems, the 15 firms were each given a questionnaire form on the basis of which FSA prepared its report.
| As most of these operations provided services to banks and insurance companies based in the UK there were some operational risks (such as financial crime, market confidence, consumer protection). The FSA’s report confirms that offshoring does contribute some material risk to the UK-based principal.
The risks identified included the complexity of achieving management control and suitable oversight from a distance. The report however does point out that the cross section of firms surveyed were aware of the risks and had appropriate risk management systems and governance frameworks in place to ensure control and mitigate operational risks.
All the fifteen firms reviewed had formal oversight structures to make sure their UK-based principals could rest assured of consumer-data security as well as efficient operations. Most of these firms were BS7799 (British Standard for Information Security) certified. Some companies had installed systems which automatically denied access to computers and buildings to staff if they resigned.
These firms also had systems that monitor phone conversations, protect data and monitor staff. “In conclusion”, the FSA report says, “there is no evidence to suggest that consumer data is at greater risk in India than in the UK.”
On the contrary, there were several advantages in offshoring to India which explained why it was the favoured offshore destination. These advantages included: (i) low operational cost (wages, overhead, etc. for captive offshoring operations and competitive charges of external suppliers); staff costs are however rising. (ii) large pool of English-speaking graduates (iii) low-cost data transmission capabilities (iv) many Indian suppliers also have near-shore services (they have offices in the UK) (v) Quite a few were expanding to establish a multi-location presence in India, to de-risk their business. (vi) Indian government offered backing and encouragement, by offering incentives, working toward a better technical infrastructure and education systems to meet the needs of the Business Process Outsourcing (BPO) and the Information Technology (IT) industries, which ensures a consistently high caliber of the staff.
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