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Indian Banks & the Global Challenges January 31, 2006
Outsourcing Opportunity: Strategic &
Operational Level
Mr.Shailesh HaribhaktiMr.Shailesh HaribhaktiManaging Partner & CEO Managing Partner & CEO Haribhakti GroupHaribhakti Group
Indian Banks & the Global Challenges January 31, 2006
What is Outsourcing
Bank's use of a third party to perform activities on a continuing basis that would normally be undertaken by the bank itself, now or in the future.
Specific feature of outsourcing is that the direct control of these operations is shifted to an external service provider.
External ServiceProvider
Intra-group Company
Independent third party
JV with Independent third party
Indian Banks & the Global Challenges January 31, 2006
Phase II2000’s
Phase I 1996-2000
Pioneers & Size Driven Factors
Increasing adopters & strategy factors
Phase III2003 - 2008
Bandwagon & Competition Factors
Captive BPOs: American Express,
GE Capital, British Airways
Accenture, EDS, Bank of America
AXA, Ford, HSBC, Citibank
Emergence of Outsourcing Industry in India
Indian Banks & the Global Challenges January 31, 2006
Banks are under increasing pressure today….
Pressures onPressures onBanksBanks
Evolving socio-economic & political
context (WTO etc)Changing consumer
concerns and buying behaviour
Increasing convergence
ShiftingRegulations
(RBS, BASEL II)
Broadening distributionpatterns Increasing customer
expectations
Changing basis of competition
Shift to a global / international market
Emerging technology
Indian Banks & the Global Challenges January 31, 2006
Types of Outsourcing in Banks
Outsourcing of activities Only parts- Individual activities of a whole process are outsourced
e.g. printing of accounts statements
Outsourcing of processes The whole business process- consisting of a set of activities is outsourced
e.g. the entire management of customer accounts
Core activities
Non-core activities
Types of Outsourcing
Indian Banks & the Global Challenges January 31, 2006
Draft Guidelines by RBI dated 06.12.2005
Activities that should NOT be outsourced
Management control
Corporate Planning
Management of investment portfolio
Compliance with KYC norms for account opening
Sanction for loans
Indian Banks & the Global Challenges January 31, 2006
Outsourcing Opportunities for Banks
Higher servicequality
Greaterefficiency
Greater flexibility
Focus on core
competencies
Lower Costs
OpportunitiesOf
Outsourcing
Indian Banks & the Global Challenges January 31, 2006
Evaluation of Risks
Types of Risks
StrategicStrategic RiskRisk
Reputation Reputation RiskRisk
SystemicSystemicRiskRisk
Operational
Risk
ComplianceComplianceRiskRisk
The service provider may conduct business on his own behalf, which is inconsistent with the overall strategic goals of the bank
Privacy, consumer and prudential laws not adequately complied with
Arising due to technology failure, fraud, error, inadequate financial capacity to fulfill obligations and/or provide remedies
Due to lack of control of individual banks over a service provider, more so when overall banking industry has considerable exposure to one service provider.
Poor service from the service provider, its customer interaction not being consistent with the overall standards of the bank
Indian Banks & the Global Challenges January 31, 2006
The Whole Range Of Core Banking And Support Processes
Sample processes
Telesales Customer service Technical support help
desk E-mail support Fax responses Live interaction
Customer
facing
Voice
Non-voice
Inbound
Outbound Telemarketing Collections (bucket
one)
Business process off-shoring services
Benefits administration
Payroll processing
Retail banking (account maintenance, opening, check processing)
Fund administration Reference data
management Claims
processing
Database integration & analytical services
Secondary research
A/R and A/P management
Reconciliation
Back office
Core business
Support
HR/ Admin
Consumer banking
Wholesale banking
Insurance
Research
Finance & Acctg.
Illustrative vendors
Indian Banks & the Global Challenges January 31, 2006
Key InitiativesCurrent Activities Outsourced
Hardware and software maintenance
Management of data centers
Outsourcing of data center operations
Disaster Recovery
Network management & monitoring
Maintenance of websites
Maintenance and management of
links at ATMs
Opportunities going forward
Help desk support
Outsourcing of customer complaints
Credit card processing & printing
Cheque processing & clearing
Cheque box clearing & collection
ATM cash replenishment
Loan servicing
Pay-roll & pensions
Data processing of day-to-day
clearing instruments like drafts and
dividend warrants
Indian Banks & the Global Challenges January 31, 2006
Contact:
Thank You
Address: 42-43, Free Press House215, Nariman Point, Mumbai – 400 021URL: http://www.haribhaktigroup.com
The Question is Not Whether to Outsource But What to Outsource
Mr. Shailesh HaribhaktiManaging Partner & CEOHaribhakti [email protected]
Tel: +91-22-5630 8232Fax: +91-22-2287 6249E-mail: [email protected]