Pinsent Masons’ Andreas Carney and Yvonne Dunn said recent developments in Ireland underscore regulators’ growing focus on outsourcing risk.
Dublin-based Carney said: “Over the last decade, and in particular the last few years, the regulatory environment in Europe has changed significantly in relation to outsourcing by financial institutions. Previously, outsourcing requirements were set at a relatively high level in EU legislation such as Solvency II and MiFID. Now much more detailed requirements are set out in guidelines from EU regulators like the European Banking Authority (EBA), and national regulators – like the Central Bank of Ireland – have issued their own guidance to help companies meet their obligations when outsourcing. “
“The CBI’s guidelines on outsourcing, finalized late last year, closely follow the EBA’s own guidelines, but are broader in scope and apply to the various sub-sectors of financial services. In addition to setting out detailed requirements related to, for example, risk assessments, regulatory reporting, financial resilience, sub-outsourcing and management of ICT and data risks, the CBI’s guidance emphasizes the need for sufficient governance around the ongoing management of outsourcing arrangements throughout their life cycle Running time. This is more than just a paper exercise for companies at the start of the agreements,” he said.
Dunn said: “We are seeing more and more financial services companies shifting their operations to outsourced service providers or to cloud-based systems, either themselves or by working with cloud-native fintech companies. This gives them access to more flexible, cheaper and more innovative technology to meet customer demand for digital solutions. This shift is essential to meet today’s market challenges, but moving systems and operations to the cloud or other outsourced service providers must not come at the expense of proper oversight of the contract lifecycle.”
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