Investment banks rethink finance offshoring model: Casting a critical eye on finance shared service centers

Investment banks rethink finance offshoring

Investment banks review finance shared service models of offshoring and outsourcing.

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Investment banks began applying a range of finance shared service (FSS) models over a decade ago, including finance offshoring and outsourcing. They are now evolving the shared service structure to a hybrid model to satisfy efficiency, standardization and compliance pressures.

 

Moving shared services up the value chain

FSSs have been an effective strategy to reduce the overall cost of bank finance functions and banks have continued to push the model up the value chain, shifting focus from ‘transactional’ roles to more ‘core’ duties, including financial and internal/management reporting.

A number of investment banks have now offshored/near-shored/outsourced more than half of their finance function and are considering offshoring complex or higher judgment finance responsibilities, such as budgeting, regulatory returns and capital management and reporting.

Results vary by shared service structure

The ability to harvest potential cost and value-related benefits often hinges on the organizational FSS structure adopted.

Some banks created a regionally-aligned structure, supported by pure team extension governance. They are structured along geographic regions or business units and day-to-day management is controlled by an onshore CFO, center head or regional counterparts. Other banks opted for a process-aligned structure, organized by the processes delivered and controlled FSS itself.

Between these two extremes, most banks are evolving to a hybrid structure. Here, shared services are structured by process, with process owners, consistent standards and efficiencies, but with dedicated regional teams within those functional/process groups to create an extended team feel and a one-team culture.

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The spectrum of shared service models:

Between the regionally-aligned and process-aligned FSS structures, the hybrid FSS structure can provide advantages.

The hybrid structure can help overcome recurring FSS challenges by enabling more integrated workflows and communication. It may also offer the central control, aligned processes, governance and quality assurance demanded by today’s regulatory regimes.

Leading practices in shared service management:

1)      Build a clear operating model with a holistic view.

2)      Embed empowered global process ownership.

3)      Develop a solid offshore risk management framework

4)      Invest in a ‘one team’ culture.

5)      Pursue process definition, refinement and automation

 

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