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Part - II

BPO: Financial Services Sector

Introduction

A decade ago British Petroleum faced declining oil production and revenues, but increasing costs in its North Sea oil operations. To survive, it needed to radically reduce costs and focus its resources on oil exploration or new acquisitions. It also required consistent, accurate, and timely financial information executives on whom it could rely on to make rapid and effective resource allocation decisions. The solution? British Petroleum used business process outsourcing (BPO) to achieve significant cost reduction in its North Sea finance and accounting function. By allowing its outsourcing provider to own its new finance and accounting information system, it avoided both costly capital investments better directed elsewhere and achieved significant economies of scale by sharing the system and associated processes with other North Sea oil companies.

What was innovative and novel 10 years ago is increasingly commonplace today. Organizations no longer use BPO as a tool to incrementally reduce the costs of back-office transaction processes in the finance and accounting function. Today BPO is a means to achieve a broad range of more strategic goals such as access to new technology and expertise that can transform inefficient processes into state-of-the-art processes, improved decision making based on better financial data and information, and radical cost reductions that can significantly impact the bottom line.

"BPO is the long term contracting of non-core business processes to a responsible provider, including support staffing and information technology, to improve business performance and increase shareholder value."

In the past, BPO was limited to back-office operations in Financial Services Provider) FSPs, but more recently BPO providers have expanded their offerings to mid- and front-office offerings. Examples of processes that are candidates for BPO include the following: -

• Banking - Credit card payment processing, cash management and mortgage origination and lending

• Securities - Trade support and settlement, custody and accounting, and mutual fund account servicing

• Insurance - Claims processing and policy administration

• Common - Payroll, benefits administration and real estate management

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*Contributed by -
Deepa Dubey,
PGDIM IXth Batch,
NITIE Mumbai.