Page 13 - Risk Management Bulletin Jan- Mar 2022

RMAI BULLETIN JANUARY - MARCH 2022

OPERATIONAL

RISK

MANAGEMENT IN

IT OUTSOURCING

ACTIVITIES

Outsourcing or the third-party risk is voted as office for a long-time covering fund administration,
the top 5 risks by a poll on Top 10 Operational transfer agency, collateral management, clearing and
settlements. However, the approach has gradually
Risks for 2021 conducted by Risk.net.
extended to entire value chain spanning across vast
range of industries and functions such as pharmacy
“It has never been more crucial for operational
management system, bookkeeping, accounting, claim
risk managers to take account of their
processing, shipping etcetera. Since it first gained
company’s critical and core third-party service momentum and popularity as a management tool,
providers,” says an operational risk executive outsourcing has been more than just a strategy to cut
at a North American bank. “The risk they can costs to building strategic partnerships that adds more
expose to a company and its potential impact value to the firm where the focus of the firm is
realigned to core systems and portfolios to remain
to daily business operations has never been
competitive and as far as possible offload all tasks that
greater.”
can be entrusted to non-competing third parties.
Introduction:
With all the benefits that outsourcing has to offer, there
For good reasons, the acceptability of businesses to are significant risks that arise while associating with a
outsource IT functions has risen dramatically in recent third-party vendor. One such leading risks are the
years. Outsourcing has been mainstreaming in the back operational risks associated with delivery or performance
not at par with the expectations, data theft and breaches,
Author Intellectual Property (IP) thefts, unethical code of conduct
and violation of firm’s and outsourced country’s law,
Deepali Venkatesh Gawda
example patient data leak covered under HIPPA law and

11