Outsourcing – Rewards and Risks

There are twelve booklets in the FFIEC IT Examination Handbook series, and ten of them make reference to the importance of managing third-party relationships. Today, the vast majority of financial institutions outsource at least one business function, and almost 50% of institutions outsource at least one critical business function. Among community financial institutions, the percentages are even higher. The two biggest reasons for outsourcing are to cut costs and to gain expertise, but there may be other advantages, such as to increase management focus on core business functions, or to refocus limited internal resources on core functions. Ultimately, the decision to outsource should fit into the institution’s overall strategic plan and corporate objectives.

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