OUTSOURCING TRENDS THAT WILL HELP YOU PREPARE FOR 2017

Transcription

1 OUTSOURCING TRENDS THAT WILL HELP YOU PREPARE FOR 2017 January

2 Introduction Varun Chandrasekaran Head of Managed Services The Red Flag Group About The Red Flag Group Christopher Sindik Director of Marketing The Red Flag Group The Red Flag Group is a global professional services firm specializing in integrity and compliance risk. We have completed over 500,000 due diligence reports for thousands of companies in the past 10 years and work with many Fortune 500 companies from around the world.

3 Agenda Overview and Objective Sources of administrative challenges Consequences Options to manage administrative challenges Compliance outsourcing defined Peer experiences using outsourcing Q&A

4 Overview 190 compliance professionals surveys completed Looking at not just the results but what it says about compliance programs 77% of compliance departments are spending significant time on administrative or resource-intensive tasks 70% of departments indicate that, as a result, more experienced team members cannot focus on broader strategic initiatives and program goals Compliance professionals are responding to these challenges by hiring new staff, working longer hours, or outsourcing work to internal service centers or external vendors

5 Objectives Provide further insight into where these administrative challenges arise from The consequences of allocating too many resources to manage administrative work Determine how compliance departments are managing increasing workloads Evaluate the viability of outsourcing compliance work and peer experiences using outsourced providers

6 SOURCES OF ADMINISTRATIVE CHALLENGES

7 Sources of administrative challenges Administrative challenges are not simply the result of large workloads. They occur due to inconsistencies in global processes and getting buy-in from various departments (support from the business) resulting in administrative work piling up for your department. Top challenges your organization faces in managing its compliance workload: Creating consistency within regional or global processes and results 45.5% Using technology to administer key processes 42.3% Getting buy-in from the business or other stakeholders to participate in the program 41.3% Managing large amounts of resource-intensive tasks 38.6%

8 Time well spent? Most time is spent on: 1. Due diligence reports 2. Compliance audits, risk assessments 3. Drafting policies 4. Training program 5. Advising internal groups There can be a disconnect between what is the most important tasks to mitigate risk and what tasks are receiving the most attention 65% are senior manager or above

9 CONSEQUENCES

10 Time spent on administrative work Greater than 80% 60-80% of our time 40-59% of our time 20-39% of our time 0-19% of our time 55% spend more than 40% of their time on administrative work

11 Stuck working on administrative tasks Please indicate your level of agreement with the following statement: Sometimes the more experienced individuals in my team must spend significant amounts of time on purely administrative or resource-intensive tasks, rather than on more complex or strategic work that must be completed Strongly agree 13.2% Agree 58.6% Neutral 17.1% Disagree 10.5% Strongly disagree 0.7%

12 Consequences Time spent on activities this year versus next year 60% 50% 40% Current Next Year Change 30% 20% 10% 0% Due diligence Compliance audits & risk assessments Drafting and updating policies Training program administration Advising internal groups Advising senior leadership Compliance program strategy Third party risk mitigation Processing applications -10% -20%

13 OPTIONS TO MANAGE ADMINISTRATIVE CHALLENGES

14 Many paths available How to deal with increased demands if outsourcing was NOT used: Option Response Percent Logged additional hours 44.3% Extended timelines 42.5% Hired permanent new staff members 38.7% Pushed back on added responsibilities 34.0% Hired temp staff members 22.6% Allocated work to other departments 31.1% Commissioned work to outside legal counsel 21.7%

15 Consideration of outsourcing Percentage of respondents who would consider outsourcing compliance work Response Definitely 7.8% Most likely 11.6% Probably 34.1% Probably not 18.6% Unlikely 14.7% Definitely not 0% I am not a decision maker, cannot answer Response Percentage 13.2%

16 COMPLIANCE OUTSOURCING DEFINED

17 What is compliance outsourcing and how does it work? Compliance outsourcing is a new trend in the industry Many organizations in the US and parts of Europe have largely developed programs, and the focus is now to make operations more efficient Compliance outsourcing can be quite similar to legal outsourcing that many companies already use, where an offshore team is built to manage administrative compliance work, such as: Processing third parties Watchlist screening Training program administration

18 Companies using outsourcing In the past, my organization has outsourced certain compliance or legal tasks to a legal or business process outsourcing (LPO or BPO) firm or organization. Not sure 20% Yes 42% No 38%

19 Program areas where outsourcing is viable Certain tasks are better suited for outsourcing than others As earlier results have shown, compliance professionals are spending a large amount of time on third party onboarding activity, such as due diligence, screening, and third party process oversight In addition, inconsistencies in processes supporting these areas, and lack of buy-in from certain departments (e.g. the business, or procurement) tends to create greater burdens for the compliance professional As a result, compliance professionals may want to focus on outsourcing these areas to an external vendor or set up an internal delivery center to help manage

20 Tasks to outsource Do you believe that outsourcing any of the following activities could be useful to your company? (select all that apply) Screening third parties against watchlist 54.5% Third party processing (entering new parties into a system, sending out questionnaires, reviewing results, etc.) 44.8% Compliance training support (providing reporting on employee training results, issuing training 38.8% courses to employee users, cataloguing certifications) Data management and clean-up 31.3% Investigations Support 29.9% Document Review 23.1%

21 Benefits and drawbacks of outsourcing Benefits Workforce power, ability to raise and deescalate teams quickly Language, country expertise Technology expertise Global teams, for follow-the-sun type support Efficient global teams can help create consistency within your processes Reduce COI Drawbacks Cost (depending on the provider) Internal oversight of provider s work still required Implementation time

22 PEER EXPERIENCES USING OUTSOURCING

23 75% of respondents who have used outsourcing in the past were satisfied with the results Were you satisfied with the experience and results from the service provider? 7.00% 5.30% 7.00% 12.30% 68.40% Very satisfied Satisfied Neither Dissatisfied Very dissatisfied Other (please specify)

24 Positive vs Negative experience Best elements: Quality and timeliness (52%) Reliability and Service (33%) Negative elements Cost (48%) Quality (29%) Reasons for not using a provider: Cost (57%) Data privacy and quality concerns (30%) No need for it (28%) Lack of internal buy-in (27%)

25 Creating buy in for using outsourcing It can be hard to say we need help in the compliance function Response: Other departments at our company are doing it successfully Hard to get a full-time hire in some situations as the work load fluctuates Outsourced solutions can be scaled up and down quickly, no long term commitment Allows more seasoned individuals to focus on priority initiatives

26 Best practices Start with a pilot program and ramp up Beneficial to work with a company or individuals that are familiar with your program already Ask yourself: What areas were you really brought in for and what should you actually be committing time to? Think about what areas are you lacking in Geographic and language capabilities Regular check ins and status updates

27 Avoid pitfalls Territoriality of responsibility Tendency to micromanage and avoid delegation Use firms with experienced compliance staff or set up your internal service center in lower cost regions Pricing structure; look for fixed costs and reasonably priced hourly fees Ensure scope of work is defined clearly

28 Summary Outsourcing can take a burden off a compliance team and let them focus on more complex issues Most companies are satisfied with compliance outsourcing results (75%) Start small with a program and build gradually Think about which areas your team is spending too much time on and what tasks you feel comfortable outsourcing

29 QUESTIONS?

30 Upcoming webinars How to kick-start your due diligence programme Jan. 26 at 8 am EST (1 pm GMT) Many compliance teams know that they need to run more comprehensive third party due diligence programmes than they currently have, but often don t know where to start. This webinar tells you how Success stories from compliance outsourcing: Best practices and avoiding pitfalls Feb. 22 at 11 am EST (4 pm GMT) The Red Flag Group will share real-life case studies, as well as current and emerging best practices, to make outsourcing compliance-related tasks a success for your company.

31 Connect Website Webinar schedule & Recordings /webinars Follow us on your feedback and comments