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Technological advancements and market changes have driven the rise of online financial transactions. As many individuals adapt and seek faster processes, enterprises struggle to streamline financial tasks while avoiding related threats.
Thus, companies of all sizes depend on business process outsourcing (BPO) to ensure risk-free financial services. Third-party providers deliver scalable resources to help boost and secure such activities.
Let us discuss why and how BPO enhances your business’s finance and accounting functions. In this article, we also explore how service vendors support your financial risk management efforts.
BPO’s Growing Popularity in Financial Services
Providing significant cost savings, increased productivity, and improved access to specialized resources is BPO’s gateway to penetrating every company’s finance department. These benefits of outsourcing thus encourage organizations to assign the following non-core financial processes to third-party teams:
- Financial reporting
- Accounting and bookkeeping
- Data entry and management
- Customer and technical support
- Financial research and analysis
- Risk management and compliance
- Mortgage and insurance processing
- Wealth and investment management
- Accounts payable and receivables support
As many business owners aim to experience the above advantages and focus on their core competencies, the global financial and accounting BPO market has grown. According to Grand View Research, the sector’s revenue reached $56.42 billion in 2022 alone.
The research firm expects the sector to expand at a compound annual growth rate (CAGR) of 9.1%. The increasing demand for reliable, cost-effective services and cutting-edge technologies drives the market’s expansion.
Why Outsourcing Financial Tasks Remains Challenging
Despite the benefits, outsourcing financial services is still challenging for companies. Note that finance and accounting processes involve sensitive information such as personal and bank account data.
Remote transactions with a BPO partner may expose your confidential data to cyber threats. According to Verizon’s research, 83% of breaches involved external actors. Attackers compromise an organization by stealing credentials, phishing, and exploiting vulnerabilities.
Hence, you need to implement robust security protocols to avoid such incidents. Apart from those cyber threats, expect to experience these challenges when working with a support vendor:
- Noncompliance with financial regulations and industry standards. Regional and governmental differences hinder providers’ and clients’ adherence to data security rules and regulatory requirements. So, aligning compliance efforts helps avoid costly conflicts and violations.
- Low quality of outsourced financial services. BPO vendors’ quality standards differ from yours, increasing the possibility of mismatched outcomes. Thus, establishing joint quality control mechanisms is critical.
- Service disruptions. Operational issues such as system failures and data input errors are unavoidable when collaborating with a BPO company. These interruptions happen during natural disasters or cyberattacks. Executing robust contingency and recovery plans helps minimize their impact.
- Linguistic and cultural differences. Misunderstandings and misinterpretations occur when outsourcing financial services due to such variations. Overcoming these BPO challenges requires centralized communication channels and cultural diversity initiatives.
- Lost control over finance and accounting services. You might struggle to maintain visibility and oversight over outsourced activities, which can result in issues with decision-making and strategic alignment. Establish clear governance structures and maintain regular communication with the BPO partner.
How Outsourcing Providers Help Manage Risks in Financial Services
When outsourcing accounting functions, BPO companies implement strategies to address risks effectively. They optimize expert insights and modern tools to facilitate data protection, compliance management, and business continuity.
As you explore what BPO is and how outsourced accounting tasks help your business, ensure the provider performs the following disaster recovery and risk management techniques to avoid the high cost of delays when working with third-party finance teams.
Utilize Robust Cybersecurity Tools and Measures
In addition to employing information security experts, BPO providers use robust tools and protocols to protect sensitive financial data. They leverage artificial intelligence (AI) and automation to ensure efficient protection while cutting costs. IBM’s recent statistics show organizations that adopt these technologies have saved $1.76 million on average.
Such expenditure reductions enable BPO companies to offer cost-effective financial services. These providers also utilize the listed platforms and applications for more robust cybersecurity:
- Firewalls help track and control incoming and outgoing network traffic. They prevent unauthorized access to confidential financial data and combat external threats.
- Intrusion detection and prevention systems (IDPS) monitor network and software activities. They automatically detect vulnerabilities to prevent breaches immediately.
- Endpoint protection software features antivirus, antimalware, and antispyware tools. These solutions safeguard computers, laptops, and mobile devices and secure financial data accessed and processed on these platforms.
- Data encryption tools inscribe classified financial data both at rest and in transit. They keep information safe from unlicensed usage, interception, or tampering.
- Security information and event management (SIEM) platforms provide real-time insights into potential cyber threats. They enable quick and effective responses to security incidents.
- Access control and authentication solutions limit financial data access to authorized personnel only. They use strong passwords, biometrics, facial recognition, and multi-factor authentication capabilities.
- Data storage and backup applications prevent the loss of critical financial information during emergencies. They enable licensed parties to have easy remote access and retrieval.
Conduct Regular Compliance Audits
Outsourcing providers specializing in financial services perform frequent compliance audits to help avoid the risk of paying high violation fees and lawsuits. Considering your location and jurisdiction, support vendors ensure their team members familiarize themselves with relevant regulatory and industry frameworks, such as the ones enumerated below:
- General Data Protection Regulation (GDPR)
- Payment Card Industry Data Security Standard (PCI DSS)
- Anti-Money Laundering regulations
- Financial Industry Regulatory Authority rules
- International Organization for Standardization (ISO) standards
Service providers assist in developing a detailed plan that outlines the compliance audit’s scope, objectives, and methodologies. They also identify key compliance areas, audit tools, and assessment techniques to streamline the process.
Furthermore, BPO firms prepare comprehensive audit reports detailing the client’s compliance or noncompliance with financial regulatory requirements. The documents include recommendations to improve your central accounting department‘s efforts.
Prepare Risk Management and Disaster Recovery Plans
BPO companies prepare comprehensive risk management and disaster recovery strategies to ensure the continuity and protection of their financial functions. They conduct thorough assessments to identify potential threats to your financial data and assets.
These providers work closely with your team to develop well-structured recovery plans for cyberattacks, natural disasters, or system failures. These crucial files include procedures for data retrieval and system restoration.
The Bottom Line
Outsourcing your financial services has benefits and challenges that impact your business growth. You gain significant cost savings and enhanced efficiency when working with third-party units. However, you might also lose money and experience downtime due to BPO-related risks.
Fortunately, service providers implement robust security and compliance measures to resolve finance-related issues. They also help prepare business continuity plans to ensure smooth financial processes.
Let’s connect if you seek further details on how an actual service provider manages threats related to financial services outsourcing. Unity Communications has critical resources that streamline your finance and accounting functions.
