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Offshore Outsourcing within the Asset Servicing Industry in Ireland

McClean, Robert (2017) Offshore Outsourcing within the Asset Servicing Industry in Ireland. Masters thesis, Dublin, National College of Ireland.

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Abstract

Outsourcing, particular offshore outsourcing has become a key growth strategy within the Asset Servicing Industry and is now seen as a necessary means to maintain a competitive edge, not just in terms of cost reduction but also in terms of utilizing the 24 hour window that global outsourced locations can provide, naturally improving clients Key Performance Indicators (KPI’s) and more importantly their distribution capabilities (Wealth Management, 2016). Many Asset Servicing firms have gone one step further and essentially expanded their operations overseas in order to leverage this resource and cost reduction concept. Using a third party, typically in India or Poland, from an Asset Servicing perspective, seems to add to the divide of locations. However many large corporations such as Northern Trust, BoNY, StateStreet and JP Morgan have specifically established their own in house operation in these locations. Having such operations under the banner of “their own firm” feels less removed, allows much greater control and desensitizes the concept for onshore staff, regulators and most importantly the clients themselves, (Gielen, 2015). In fact most top tier Administrators in Dublin have modeled this low cost or “Tier 3” location concept, leased premises , most likely after receiving a local offshore government grant or promise, rebranded the office space and commenced hiring and training of lower cost and typically highly educated labor. Most top tier administrators do this similar to the franchise practice of a McDonalds or Merry Maids, (Forbes, 2009). Right down to the color of the carpet selected, the office space looks and feels identical to the parent onshore office. This has become a highly effective practice and has somewhat reduced regulator, client and onshore staff concerns in having the offshored firm under the banner and control of the parent company. Firms who have completely outsourced to a third party firm, not within their own company tend to get more challenges and regulatory scrutiny than those who have invested in their own offshore operation (Rousseau, 2015). The question of course is how sustainable this strategy is, what long term impacts does it have to onshore and indeed offshore economies and will the competitive advantage it currently brings still remain competitive in a highly evolving technologic world we live in but moreover in the face of ongoing regulatory scrutiny of such arrangements by the Central Bank of Ireland (Burke-Kennedy, 2017). It’s also important to analyse some the hype that surrounds Robotic Process Automation (RPA).

RPA is on the cusp of being a major disrupter in the Financial Services Industry, not just with Asset Service companies but also with Asset Managers themselves. Will offshoring itself be diminished with the introduction and takeover of RPA type technologies? Although limited studies exist around RPA and future impacts on Irish Assets Servicing firms, the dominant view is it is likely to play a major role into the future of offshoring (Cline et al., 2017)

This research will look at the implications of the current, evolving and increasingly more stringent regulatory environment within Ireland limiting of limiting the use of offshore outsourcing. The research will further examine the perception and opinions of Asset Managers to offshore outsourcing and rationale of Asset Servicing firms for using offshore outsourcing.

The aim of this study is to examine the overall perceptions of Asset Managers and Asset Service providers in terms of the usage of offshore outsourcing against the regulatory challenges imposed by the Central Bank of Ireland. The main research method will be qualitative face to face interviews with 4 Irish based Asset Managers that will be triangulated with a brief quantitative online survey aimed at a 7 Asset Service providers out of the 31 Asset Servicing firms based in Ireland.

The findings suggest that there are considerable strains emerging within the Industry right now due to evolving products. The net effect of these new products is a higher demand for firms to deliver quicker turnaround for NAV prices, thus causing them to create shift teams in Ireland at a considerable cost. Given the CBI legislation on outsourcing firms are under pressure to outsource less and retain responsibility and accountability in Ireland so using offshore locations is under serious scrutiny. As a result firms in Ireland are now in danger of becoming too expensive to do business with and Asset Managers may look overseas, in particular Luxembourg and the UK for alternatives.

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HG Finance > Investment > Investment Companies. Investment Trusts. Mutual Funds.
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management > Human Resource Management > Outsourcing
H Social Sciences > HD Industries. Land use. Labor > Specific Industries > Service Industry
Divisions: School of Business > Master of Business Administration
Depositing User: CAOIMHE NI MHAICIN
Date Deposited: 21 Nov 2017 10:50
Last Modified: 21 Nov 2017 10:50
URI: http://trap.ncirl.ie/id/eprint/2870

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