Over the years I’ve had many conversations around what is and isn’t outsourcing. One issue is whether the service in scope is significant or material and this has proved to be something of a movable feast.  Leaving aside compliance to outsourcing guidelines having clear criteria in this area ensures organisations can focus resource and risk management effectively on key functions – and avoid endless, time consuming debates on what is in or out.

The latest EBA Guidelines on Outsourcing are helpful. The Guidelines use the term ‘critical or important’ and define what this means. Here’s a brief summary of the EBA Guideline tests.

1.      Is there a potential impact on your regulatory authorisation requirements?

2.      Will disruption or failure to deliver to agreed service levels impact financial or operational resilience, business continuity, identified operational or reputational?

3.      Will outsourcing a particular function impact the ability to manage risks, comply with regulations or conduct audits?

4.      Might customers be impacted?

5.      In the round is there a concentration risk exposure?