</p> The provision of financial services is both competitive in nature and relentless in its change of pace, driven by the international ambitions of firms and the clients they service. This is changing the way service providers, such as custodian banks, are structuring themselves to provide solutions which not only solve an operational or technical requirement but provide additional value.</p> The outsourcing of middle and back office functions has become increasingly commonplace in Asia Pacific. Though the market for such services could be said to be mid-way to maturity, banks and brokers here have sought out trusted partners to prepare for their wider regional and international ambitions. The reason this has occurred is as much down to internationalisation as it is to the increasing demands of local and international regulation. Growing operational risks from both these forces have led the majority of banks and brokers in Hong Kong and Singapore, for example, to look to specialist providers to offer something that they believe is becoming harder to competitively deliver themselves.</p> A survey we conducted last year with YouGov shows just how many banks and brokers in the Asia Pacific are turning to specialists to manage different areas of their business:</p> </p> </div> </div> </div> Being able to adapt smoothly to activity in new markets with various and shifting regulatory demands while managing long term expansion is a challenge. The cost of bespoke, in-house IT and operational capacity is not considered money well spent for many organisations, especially smaller and medium sized ones. It is more efficient to appoint credible service providers who are committed to invest in keeping pace with change and who operate on behalf of many industry participants to stay abreast of new market and regulatory requirements.</p> Outsourcing is not simply the performance of operational tasks. It is often much more sophisticated and goes beyond the simple reduction of investment or running costs for banks and brokers. Indeed it is seen more and more as a way of reducing operational risk by transferring tasks to a specialist. Increasingly, especially among banks and brokers, it is also a way for them to reduce capital requirements and to access liquidity and collateral management solutions.</p> </p> </div> </div> </div> Though many see outsourcing as vital to their long term strategy, allowing them to focus on core expertise, appointing a provider for middle and back office functions requires overcoming some negative preconceptions. ‘Loss of control’ was cited as a major concern by many of our survey respondents. Firms must feel they are able to mitigate the loss of control felt when they pass operations to their chosen provider with oversight tools and simplified access to investment data, and be assured providers have the correct infrastructure in place to absorb the operational burden of handling market change.</p> As reliance on providers looks set to grow across the industry, so should expectations of the providers’ capacity to innovate, upgrade their operating models and provide new ways for clients to maintain oversight of their operations.</p> Providers who can demonstrate this to their clients will be well set to service a sharp increase in the number of forward thinking, internationally ambitious banks and brokers in Asia Pacific who are partnering with specialist firms to realise their growth ambition</p>