Page 41 - Insurance Times March 2022
P. 41
OPERATIONAL
RISK
MANAGEMENT IN
IT OUTSOURCING
ACTIVITIES
Outsourcing or the third-party risk is voted as the collateral management, clearing and settlements. However,
top 5 risks by a poll on Top 10 Operational Risks the approach has gradually extended to entire value chain
for 2021 conducted by Risk.net. spanning across vast range of industries and functions such
as pharmacy management system, bookkeeping,
accounting, claim processing, shipping etcetera. Since it first
“It has never been more crucial for operational risk
gained momentum and popularity as a management tool,
managers to take account of their company’s outsourcing has been more than just a strategy to cut costs
critical and core third-party service providers,” to building strategic partnerships that adds more value to
says an operational risk executive at a North the firm where the focus of the firm is realigned to core
American bank. “The risk they can expose to a systems and portfolios to remain competitive and as far as
company and its potential impact to daily business possible offload all tasks that can be entrusted to non-
operations has never been greater.” competing third parties.
With all the benefits that outsourcing has to offer, there are
Introduction:
significant risks that arise while associating with a third-party
For good reasons, the acceptability of businesses to vendor. One such leading risks are the operational risks
outsource IT functions has risen dramatically in recent years. associated with delivery or performance not at par with the
Outsourcing has been mainstreaming in the back office for expectations, data theft and breaches, Intellectual Property (IP)
a long-time covering fund administration, transfer agency, thefts, unethical code of conduct and violation of firm’s and
outsourced country’s law, example patient data leak covered
Author under HIPPA law and external factors such as breakdown of
Deepali Venkatesh Gawda infrastructure or disaster. Such risks can be managed and
mitigated by effective operational risk management.
The Insurance Times, March 2022 41
