This paper aims at discussing business process outsourcing on investment and asset management. This is an area that firms consider when making hedge and mutual funds financial decisions. This paper focuses on this area with an aim of transforming an organization to maximize on the cost savings for the business process.
Many categories seek to facilitate business processes when one thinks about outsourcing. A business process touch on different areas in an organization, customers, and vendors categorize business processes under different structure depending on the company’s internal structure. An Investment and Asset Management proposal can offer a firm a chance to outsource investment from a well-established company with large portfolios and good structure in management. In this era, investment management firms face pressure due to stiff competition and demand for operational excellence. Outsourcing can respond to this challenge by focusing on a company core competence and business objective.
Business Process Considerations
Pai & Basu (2007) says that vendors market BPO as an option to the normal deals in IT to encourage customers identifies difficult and inefficient processes. The entire process falls on the management, which agrees with the vendor so as to ensure customer satisfaction and cost savings in the organization. The Asset management can consider the option of outsourcing from the two management models. The first one is the lift-out model.
In this model, the outsource provider takes control over the entire process. The provider seeks to build the foundation of the business to achieve economies of scale. The second model is the component-based model. In this model, the firm outsources selected portions of operations from the provider. This model reduces the likelihood of conversion. It is a good strategy in case the vendor does not have mature solution.
Currently, the market has dynamics that change the outsourcing services. Firms are working to unify their investment-operation outsourcing and asset servicing platforms (Foogoa, 2008). Investment management operations outsourcing services consist of all management activities that follow portfolio management and client reporting as well as integrated back office. Firms are working to ensure operational efficiency by lowering costs and maximizing opportunities. This is due to the declining asset values and the fluctuations present in the market. This has led to the increase in outsourcing to non-core functions of businesses. There is a demand for transparency in the post global financial crisis.
The current market is vibrant coupled with stringent regulations and structural underpinnings. The mistake of cyclical revenue and fixed cost structure calls for the solution of seeking efficiencies and applying a variable cost structure. Asset managers have to prioritize to remain competitive by having an accurate return on equity. Asset managers have to streamline and improve efficiencies that will translate to more investments.
Once the firm receives proposals from the vendors, the outsourcing team will review and evaluate the vendor in terms of services provided. The time allotted ranges from two to eight weeks. The vendor evaluation process varies with the customer approach, number of vendors evaluated, time, and audit requirements. The outsourcing team will select the vendor using the evaluation criteria. Then they will identify the participants by ranking the vendors (Handley & Jr, 2009). Next, a scoring system will have an establishment to weigh the key criteria, and finally there is the implementation of the sign-off procedures. It is important at the end of the evaluation period the customer to identify a vendor or vendors.
The BPO contract has a framework that pursues the vendor requirement to ensure good performance requirements (Foogoa, 2008). The contract highlights the procedure for transferring customer assets to facilitate the business process in the presumed department. The vendor operates and manages the customer operations as detail in the transaction. There are many issues revolving the entire outsourcing transaction. The contract can resemble an asset purchase and a sales agreement.
Parties to a contract have to negotiate to ensure fairness and all assents to the contract (Pai & Basu, 2007). It is important for the relationship to overcome obstacles in the course of work t ensure the flourishing of the contractual relationship. The contract must promote the needs of both parties. A fair contract ensures that both parties meet their obligation to translate in an optimal economic performance. Firms have a different perception towards the cause of comprehensiveness (Pai & Basu, 2007).
A contracting party must identify benefits and risks associated with the transaction prior to the process of negotiation. The involvement of an attorney in this agreement is mandatory. It is important for the customer to seek clarification since the vendor standard form bears many complexities. An attorney acts as a project leader and gives counsel in the formulation of the contractual agreement. Attorneys are essential in resolving disputes, in the making of the contract since the deal takes a lengthy process to formulate.
BPO contracts entail the transfer of main assets and other items that facilitate the flow of business transactions (Tas & Sunder, 2004). The transfer process is crucial in making the agreement. This is because it permits the customer to transfer assets and other items and receive payment in a lump sum as detail in the contractual agreement. In case of an asset or facility transfer, both parties need to negotiate on the BPO contract.
In a financial transaction, some of the criteria include base pricing, cost savings, budget comparison, taxes, and financial stability, among other criteria. On the occasion, the outsourcing team agrees with the evaluation criteria the customer ranks the vendor based on fulfilling the criteria. The customer can implement a voting system to allow every member to submit own assessment concerning the proposal of the vendors. Participants in this process can extend to include key stakeholders such as the asset manager (Handley & Jr, 2009). This process is subject of the audit process; in this case, the entire document in support of the respondent assessment is subject to scrutiny.
When identifying vendors to provide BPO services, the customer can select possible vendors depending on the scope of the outsourcing process. The customer has the option in making the consideration for the number of vendors to carry out the process. Consequently, the customer may consider one vendor to continue with the operation of the outsourcing process.
In a complex outsourcing, process that calls for high tech development and implementation methodologies can require many vendors. The geographical scope of the outsourcing can also necessitate the number of vendors in the operation (Foogoa, 2008). In overseas transactions, the customer can identify the vendors with resources in the regions considered for outsourcing.
Vendors in the BPO industry are in performing all duties that seek to satisfy the customer. Most vendors look at the external environment so as to acquire knowledge in the face of different establishments.
Preparing a Timeline
The period that marks the start of the outsourcing process until the signing of the contract is from two months to two years. This period is subject to other factors such as the purpose of outsourcing, the flexibility of the customer and the vendor, and the nature of the transaction. In a large organization structure, there is less time pressure to introduce outsourcing once there is approval from the senior management (Pai & Basu, 2007).
In a complex transaction, the customer may not be able to state the period accurately. This is because there are many regulatory and legal stipulations. In a financial institution, the vendor has to obtain permission from the banking management, as well as government or an agent. The law can impose a notice, and this can limit the time of the process.
The vendor has a tendency to finish the outsourcing process within a short time. The length of time depends on how fast at customer can initiate a transaction (Tas & Sunder, 2004). A truncated timetable has vendor selection in an attempt to reduce the period of the transaction. The customer has to check the benefits of completing a transaction within a given time. The customer makes an effort to minimize loss and throughput.
The process of defining the requirements of the outsourcing process takes a lot of time. It is important to discharge the transaction expeditiously. A drawn out process can affect the morale of the workers. The time to obtain concession is usually limiting, and this can affect the vendor’s time to finish a transaction. A customer has to ensure commitment and due diligence in the negotiation of the outsourcing process.
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