How to offshore bank processes optimally

As offshoring becomes mainstream, banks must overcome their conservatism and develop a mature understanding of distributed processing. A well developed thought process around distributed processing involves a clear understanding of the choice and sequencing of activities to be off-shored, the medium of delivery, governance, and controls for delivery of banking services.

Sequencing Activities

The first and perhaps the most critical step in off-shoring is the identification of activities that must be off-shored.

Risk - Mobility Analysis

Traditionally, risk - mobility analysis has been used to choose processes that can be off-shored. While this suffices as a simple Go-No Go analysis for outsourcing, it often results in fragmented activities being outsourced, leading to longer cycle times and reduced efficacy. The analysis lays emphasis on cost efficiency and does not focus on the other drivers and strategic intent of the bank.

Strategy-Mobility-Adjacency-Risk-Target Analysis (SMART)

Artha Shastra's SMART methodology improves on the traditional risk-mobility framework and recommends that related process clusters be off-shored together to one single service provider. This approach reduces the inherent hand-offs involved while handling fragmented activities, improves control, and increases process efficiency.

The SMART analysis identifies processes that can be off-shored based on the following parameters:

• Management Focus (Strategic Input): Revenue, cost control, customer service, etc.
• Process Mobility: Degree of digitization, complexity of interactions, absence of niche skills, ease of knowledge transfer, standardization, etc.
• Process Adjacency: Controls required, fragmentation and hand-offs, downstream dependency, and time criticality.
• Risks & Controls: Financial, regulatory, franchise, and technology risks