The global financial services sector is under constant pressure to cut costs, streamline operations, and generate growth in an increasingly competitive and regulated environment. At the center of this pressure cooker is financial analysis, a critical, but time-consuming process that often ties up valuable resources. One strategic solution gaining considerable traction is financial analysis outsourcing.
Financial analysis outsourcing is the process of contracting an external expert or agency to handle financial analysis tasks traditionally handled internally. This might include work like analyzing financial statements, forecasting, budget modeling and valuation, risk analysis, and so on.
The Benefits of Financial Analysis Outsourcing
An EY financial services outsourcing survey found that 27% of financial services organizations plan to significantly increase their use of outsourcing, primarily driven by the desire for cost reduction and the need to access specialist skills.
Here are some prime benefits of outsourcing financial analysis:
By outsourcing financial analysis, financial sector businesses can reduce their operational costs significantly. Ernst & Young estimate firms that outsource effectively can reduce their costs by up to 20-30%. This is achieved by reducing the overhead related to recruitment, training, and maintaining in-house analysts, the cost of software, and infrastructure.
Access to Expertise and Advanced Tools
Outsourcing allows businesses to leverage the advanced tools and expertise available with specialized agencies. They can thus get access to top-notch financial analysts and sophisticated technology without the need for capital investment.
Enhanced Focus on Core Activities
By outsourcing, firms can free up their internal resources from non-strategic activities like financial analysis to focus on core areas needing direct attention.
Outsourcing Can Address Concerns!
While the advantages are considerable, some concerns arise when considering outsourcing. Front of mind are issues of data security, loss of control, and disruption in service. However, these concerns can be effectively managed.
Data security is a pertinent concern. However, most professional service providers have stringent security protocols in place, including encryption, firewalls, and regular audits, ensuring data remains safe and confidential.
Loss of Control
Another concern could be the loss of control over the analysis process. However, with clear guidelines, regular reporting, and performance metrics, this can be effectively mitigated. Most service providers also provide seamless integration with existing tools, ensuring a sense of control is maintained.
With a well-crafted service-level agreement (SLA), businesses can ensure minimum disruption in service. This can include agreed-upon turnaround times, established protocols for handling service interruptions, and alternate solutions for any potential issues.
The Compelling Conclusion
The outsourcing of financial analysis is a strategic move enabling companies in the financial sector to pare down costs, access expertise, and allocate resources to value-adding activities more effectively. By carefully vetting service providers and establishing clear guidelines and protocols, firms can overcome potential hurdles and harness the full potential of this strategy.
As business environments become more complex and competitive, the relevance and viability of financial analysis outsourcing for the financial sector will only continue to grow. In a nutshell, the judicious deployment of financial analysis outsourcing cannot be overlooked as a key part of strategic planning for capturing growth in the financial sector.