Last week, I focused on the risks associated with outsourcing within the bank's operational area. Although there are various perspectives on which core functions are being outsourced in some banks, maintaining a balance between risk and return remains essential.
It's never too late to correct past mistakes. No matter what occurs, outsourcing has become a worldwide trend. Managing the consequences of outsourcing is crucial. Financial experts are most effective when focusing on their primary responsibilities. All other activities should also be closely watched to prevent any losses, and if they occur, they should be minimal.
- Recruitment: Several banks participate in the hiring process for tellers, front office staff, and sales representatives. Once the applicants are shortlisted by the external company, the bank conducts interviews to determine which candidates align with the bank's corporate values. The outsourced company carries out background checks, which can also be verified by the bank's Security Coordinator, helping to prevent individuals who frequently move between companies. These are the risky individuals who tend to commit fraud in any organization they join.
- Orientation: I suggest that the resource persons should consist of current staff members, some young role models within the bank who have gone through similar experiences, branch managers to guide them through regular branch operations, department heads, as well as external experts to provide standard global expectations and inspiration.
- Communication: Because of specific sensitive factors, some banks do not add outsourced branch employees to the official email group. Taking into account that numerous outsourced branch staff have been stationed in the same location for more than three years, I suggest establishing a dedicated email group for these individuals to receive updates regarding bank communications, training resources, and any other pertinent information they need to stay informed about current banking developments. A significant number of them are highly educated and familiar with technology.
- Regular Refresher: This is a standard expectation for both external contractors and permanent employees. At times, it might happen that the external staff receive ongoing training while the permanent employees do not. This leads to an inconsistent department with knowledge disparities that ultimately impact customer support over time.
- Reward Schemes: It is consistently an emotionally charged time when bonuses are distributed to regular employees. The joy and enthusiasm displayed by these staff members can sometimes overshadow the sentiments of those who are outsourced. Although the bonus policy does not cover contract workers, the handling of this situation at the branch level should be done with maturity. Can you picture a woman expressing great happiness upon seeing her bonus credited to her account, sitting beside an outsourced employee who has carried out the same role throughout the year but received nothing? Well, branch managers often attempt to gather some small token for these individuals, although this is entirely voluntary. I am aware that in certain banks, arrangements are made for minor end-of-year gifts for outsourced staff. Regardless of the approach, it must be handled professionally by everyone to prevent any hostility among the workforce.
- Monitoring: Can you picture a Supervisor of Tellers saying, "I'm not concerned about overseeing the tellers. After all, they are external employees, so any losses they cause will be covered by their company"!!! That's a risky statement. Any supervisor who holds this view doesn't deserve their position. Steps should be taken to identify any discrepancies to prevent future errors and maintain customer confidence. Some external staff have become withdrawn because they feel there's no job security. These individuals require career support and monitoring to address their issues. Money isn't everything. Many losses could be prevented through these relationship-building approaches, which cost the bank little or nothing.
- Full Dedication from Third-Party Provider:I am unable to refrain from expressing gratitude to all outsourcing companies for their commendable efforts in assisting financial institutions to provide services at reduced costs and enhanced convenience for customers via cash collection, mobile money collection, account opening, and similar initiatives. I therefore urge them to treat their employees as their own, conduct regular training sessions, hold more staff meetings to keep them informed about the latest developments in the banking sector, and provide career counseling.
Bank of Ghana's Outsourcing Guidelines
So far, I have chosen only a few functions that most banks typically outsource within their branch locations. However, the outsourcing of specific bank functions is subject to strict regulations from the Bank of Ghana, starting from November 2024 and becoming effective in July 2025. Below are some excerpts from the Directive for reference:
“Empirical evidence shows that outsourcing within the banking industry initially focused on functions unrelated to core operations, like handling payroll. However, in recent times, typical outsourced tasks have expanded to include information technology (IT), management services, accounting, auditing, and human resources, among other areas. As digitalization progresses and the significance of IT and financial technologies (FinTech) grows, RFIs are modifying their business models, procedures, and systems to incorporate these advancements. IT has now become one of the frequently outsourced functions in the banking sector.
Despite its advantages, outsourcing IT and data services poses information security risks and challenges to the governance structure of RFIs, particularly concerning internal controls, as well as data management and data protection. The Bank of Ghana (BOG) acknowledges that RFIs might have valid justifications for outsourcing, such as achieving economies of scale, enhancing customer service quality, or improving risk management practices. The primary motivations for outsourcing include reducing and managing operational costs, and addressing the challenges brought by technological innovation, greater specialization, and increased competition. RFIs have expanded their use of IT and FinTech solutions and have initiated projects aimed at boosting their cost efficiency.
However, the outsourcing of business functions can lead to a greater reliance on Service Providers, potentially increasing the RFI's risk level and endangering its overall safety and stability, especially when significant business activities, services, or processes are handed over to an unmonitored third party or an overseas Service Provider. Outsourced services are also growing more intricate and may raise an institution's vulnerability to strategic, reputational, compliance, operational, country, and concentration risks. As a result, the BOG has issued this Directive to RFIs to ensure they properly manage the risks linked to outsourcing.
Considering the above, the BOG will take into account the effects of outsourced services while performing a risk evaluation for an RFI. The evaluation will involve, among other things, assessing whether the outsourcing setup in any way hinders the RFI's capacity to fulfill its regulatory obligations. The BOG will also evaluate the possible systemic risks that arise when the outsourced operations of several regulated entities are concentrated within one or a few Service Providers. iii PUBLIC PUBLIC Outsourcing should not result in an RFI becoming an "empty shell" without the necessary substance to maintain its license. To achieve this, the Board and Senior Management must ensure that adequate resources are available to properly support and carry out their duties, including monitoring the risks and managing the outsourcing agreements.
I hope these views on outsourcing tasks on the shop floor prove helpful as you take a step back to evaluate your outsourcing strategy. It's never too late to think about making some changes. I pray that banks and outsourcing companies strengthen their collaboration in more productive ways. After all, this will help minimize risks and losses for both organizations. Let us engage in outsourcing where all parties involved achieve a win-win outcome, particularly in areas such as:
- Teamwork
- Mutual comprehension among all employees on the production line
- Ongoing training sessions for all employees
- Decrease in fraudulent activities and financial losses
- Providing improved client support
- More thrilling customer interactions leading to increased referrals and support
Ultimately, a contented bank employee leads to efficient service provision, which results in satisfied customers, and ultimately a pleased bank!
ABOUT THE AUTHOR
Alberta Quarcoopome holds the title of Fellow at the Institute of Bankers, andHead of ALKAN Business Consult Ltd.She is the writer of three books:“The 21stCentury Bank Teller: A Strategic Partner" and "My Front Desk Experience: A Young Banker's Story" and "The Modern Branch Manager's CompanionShe draws upon her background and real-world examples to train emerging bankers in areas such as operational risk management, sales, customer service, banking operations, and fraud detection.
CONTACT
Website www.alkanbiz.com
Email:alberta@alkanbiz.com\xa0 or albique@yahoo.com
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