Should Your Risk Management and Compliance be handled In-house or Outsourced?

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As international business expands and evolves, both across real world connections and the web, the task of risk management and compliance grows more and more complex. Today’s compliance demands are more evolved and more elaborate than even just a few short years ago. To keep up with these demands, compliance officers and/or risk management teams are required to have a greater understanding of current and unfolding global events, a broader knowledge base, a higher skill set level and, preferably more real-world experience.

For many companies, particularly smaller businesses, being able to maintain this level of specialist skills in-house, is not always a realistic or viable option. Taking into consideration the ever-increasing complexity of regulatory compliance, both at a local and an international level, and it becomes easy to see why outsource this vital function is so appealing.

If you are at the cross roads of trying to decide whether to keep your risk management and/or compliance team in-house, or outsourcing to a specialist firm, answering a few essential questions is a good place to start:

1. How would outsourcing to a third-party specialist impact your day to day operations?

2. Could combining a third-party specialist in a supportive role to your existing in-house compliance and risk management team be the way to go?

3. Would consolidating or streamlining your compliance or risk management sector improve the flow of your business?

4. Would outsourcing to a specialist help you to avoid any possible pitfalls relating to compliance oversight or risk management blind spots?

If you answered yes to more than two of these questions, outsourcing your compliance and risk management functions may be your best option. Let’s take a more in-depth look at some of the main benefits of outsourcing.

Main Benefit of Risk Management and Compliance Outsourcing

With the noticeable increase in focus on compliance and effective risk management in recent years, companies both large and small are finding it challenging to recruit enough specialist staff to ensure maximum risk management and compliance functionality.

This is especially true when dealing with compliance, as the ever-increasing regulatory scope can easily put any business at risk of non-compliance. Ensuring that your business meets its obligations to its clients, shareholders and employees is difficult enough, without the added pressure of ensuring that no area as it relates to compliance has been overlooked. The outsourced firm would also be more immune to the usual internal commercial pressures to approve a customer no matter what.

This is perhaps the main benefit to outsourcing your risk management and compliance functionality. A specialist company dealing in risk management, proper onboarding, and the best CDD and KYC practices that go towards meeting all compliance requirements, can assess your needs and ensure that you always meet these requirements, thereby reducing your risk profile considerably.

While it may seem to some to be counterintuitive to spend more of your budget on outsourcing these key areas, in the long run it would allow you to focus on the core aspects of your business. Knowing that a specialist is taking care of every detail with regards compliance and risk management, will also go a long way in alleviating operation pressures that may have been hampering productivity or even impacting your fulfilment of legal obligations. Since specialist firms take on multiple clients, they may also offer scale-able service solutions in proportion to the size of your business. This could result in a cost saving that may not have been met had you hired someone to fill a permanent in-house position.

Outsourcing could also allow your business to benefit from far more sophisticated systems that could significantly reduce your risk. This is especially true when it comes to functions such as client onboarding, where an outsourced specialist has at its disposal greater resources to thoroughly investigate each client or potential business partner.

Why Some Prefer to Keep it In-house

Despite the obvious benefits that can come with outsourcing your risk management and compliance functions, many companies still prefer to keep these functions in-house. There are a number of reasons for this, including the belief that outsourcing requires reliance on a third party, where it is not possible to control standards or outcomes. Some companies are also fearful or weary that an outsourced firm many not be able to deliver to a high enough standard or within a set timeframe. However, application of the four eyes principle (having an independent set of eyes looking over new customer account applications) will generally result in higher quality of outcome, and if you do your homework and research the outsource specialist thoroughly, this shouldn’t be an issue.

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