ISG Research: Financial Services Firms Lack Adequate Governance
Firms increasing service provider risk management, compliance capabilities in
response to outsourcing trends, regulatory scrutiny
Clients badly need outside assessment of existing frameworks followed by
prioritization of critical needs
STAMFORD, Conn., Feb. 6, 2013
STAMFORD, Conn., Feb. 6, 2013 /PRNewswire/ --Information Services Group (ISG)
(NASDAQ: III), a leading technology insights, market intelligence and advisory
services company, today released research concluding that many financial
services organizations are ill-equipped to manage risk in their supply chains
and poorly prepared to face increased scrutiny from regulatory bodies.
"Financial services institutions face significant supply chain risks due to
their reliance on elaborate networks of first-, second- and third-tier
suppliers to manage critical processes and operations," said Peter Lauer,
Partner, ISG. "At the same time, regulators are subjecting firms to
increasingly rigorous compliance audits, through initiatives such as
Dodd-Frank, as well as through stricter enforcement of existing standards."
In many cases, Lauer adds, enterprises facing a regulatory audit lack the
capability to demonstrate effective oversight and governance of their supplier
"Banks and insurers often don't know what they don't know about their supply
chain risks," said Lauer. "While they may have processes and reporting
requirements defined, significant gaps exist between what's documented and
what's actually used to make decisions and manage suppliers and service
The growth of multi-sourcing, coupled with increasingly shorter deal terms,
has contributed to this problem, as the data collected and processes put in
place during pre-contract due diligence quickly become obsolete as contracts
expire. Another issue is non-standard systems and reporting requirements that
fragment the delivery chain and make it difficult to aggregate information or
define accountability when a problem occurs.
As a result, rather than ensuring coordination between the myriad entities and
touch points involved, governance and supply chain risk management efforts are
often limited to addressing discrete risks or solving isolated problems.
As a first step in addressing these issues, ISG recommends an assessment of
existing governance frameworks to prioritize critical needs and identify
potential solutions. Over the longer term, bringing together client and
supplier teams to facilitate collaborative discussion can allow all parties to
build a holistic view of service delivery and the interrelationships along the
service delivery chain.
According to Lauer, this collaborative process can also drive standardization,
another critical element of effective governance. "Once you define standard
roles and responsibilities, you can begin to make contractual changes to
re-define problematic supplier touch points. You can also begin to calculate
the value of specific changes, such as limiting re-work, catching billing
errors, or assuring continuity of supply."
The ISG White Paper, titled, "The 'Uh Oh' Moment: Financial Services
Enterprises Focus on Governance, Transparency and Supply Chain Risk," is
co-authored by ISG Directors Lois Coatney, Chuck Walker and Joe Yacura.
About Information Services Group
Information Services Group (ISG) (NASDAQ: III) is a leading technology
insights, market intelligence and advisory services company, serving more than
500 clients around the world to help them achieve operational excellence. ISG
supports private and public sector organizations to transform and optimize
their operational environments through research, benchmarking, consulting and
managed services, with a focus on information technology, business process
transformation, program management services and enterprise resource planning.
Clients look to ISG for unique insights and innovative solutions for
leveraging technology, the deepest data source in the industry, and more than
five decades of experience of global leadership in information and advisory
services. Based in Stamford, Conn., the company has more than 800 employees
and operates in 21 countries.
For additional information, visit www.isg-one.com.
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SOURCE Information Services Group (ISG)
Contact: Andrew Park, ISG, +1-919-259-9252, email@example.com; or
Gwennie Poor, Cohn & Wolfe for ISG, +1-212-798-9842,
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