Ethics & Compliance in Outsourcing Financial Services

Martin Sorrell, Chief Executive of the U.K based WPP Group said, "I believe it will be increasingly important to do business internationally; I believe it will be increasingly fascinating to do business internationally, but I do not believe it will become any easier - it may indeed become more complex." Today, if ethics and compliance are being discussed and worked upon so fervently, it is because of the intense complexity involved in global business.

Why are Ethics and Compliance all that Important?

Critical ethical issues can damage the reputation of the most credible organizations. It is simply not enough to build up a corporate image, it is equally important to sustain it. And for that, your inherent values count.

In the larger perspective of global businesses, ethics has a greater say than many other factors. The acceptance of ethical compliance in business is a powerful factor in influencing your decision to choose business partners.

Unless you want to spend sleepless nights thinking about the security of your information and the future of your outsourcing business, an ethical outsourcing partner should be your choice.

What Difference Does it Make to Partner with an Ethical Organization?

The most significant answer is 'risk'. You have an environment of values and your risk factor is reduced to the minimum. An ethically compliant organization will have:

• Positive work environment
• Well defined systems to ensure values are not just written documents
• Reduced employee cynicism
• Compliance with law
• Reputation as a credible and responsible business organization.

Is the Existence of Compliance Programs a Clean Chit to Ethical Compliance?

This is indeed a tricky question. You can set standards, but how are you complying with those values that you have set? An interesting revelation in the 2005 National Business Ethics Survey (NBES) is that though compliance programs have been able to do their bit, organizational culture has greater influence in determining the success of compliance programs. This demands that you be shrewd enough to probe into the organizational culture of a company before entering into a contract.

How will I Identify if a Company is Ethically Compliant?

You can check for an ethics and values policy. But remember that it is not just about having a written document but the actual compliance to the standards that have been set.

• Evaluate the thread of ethics, compliance and organizational culture. Good corporate governance is defined by the mutual compatibility of all these three factors.
• How open and clear is your vendor? The transparency that the vendor offers you will decide the future course of your partnership.
• Evaluate if your vendor is addressing your high priority concerns. Also, ensure that there are enough systems and programs in place to ensure that you will not be at risk.
• Ask if there is a good process in place for reporting ethics and compliance issues.
• Make sure that your vendor company ensures employee credibility.

Why is Ethics and Compliance Important in Financial Outsourcing? Why do Outsourcing Projects Fail?

One main reason for the failure of outsourced projects is the non compliance to ethical standards. Ethics is important in all phases of business. The degree of its significance is much more when it comes to financial outsourcing.

When you are outsourcing a core business function, you need to ensure trust and credibility. The basis of an outsourcing relationship lies in how much of clarity you can bring in to that relationship. Ethics matters the most when things go wrong. When you are at risk everything boils down to the values that both the companies uphold. Moreover, long term success of any business depends on its ethical values.