Securities and banking industry regulators have spelled out the risks involved in outsourcing and issued a set of core principles for financial firms to follow when moving business out of house.
The publication of the reports - by the cross-industry regulatory Joint Forum and the International Organisation of Securities Commissions (Iosco) - follows an extended consultation process with industry participants.
The Joint Forum principles focus on establishing coherent policy and risk management programmes for outsourcing activities. Issues for consideration in drawing up contracts and contingency planning are also discussed.
In developing the outsourcing principles, the Joint Forum worked closely with Iosco, which has issued a complementary set of seven principles. These include the due diligence process in selecting a service provider, the contract with a service provider, business continuity issues, client confidentiality, concentration of outsourcing services, termination procedures and access to books and records.
The Iosco report follows a survey of industry participants which found that a clear majority of firms in all jurisdictions has in place some form of outsourcing arrangement.
The chairman of the Iosco Technical Committee, Andrew Sheng, says: "The results of our survey on outsourcing indicate that financial intermediaries are outsourcing significant aspects of their business activities to service providers."