Due Diligence of Outsourcing: Bank
The Situation
A UK retail bank with a long history was carrying out a turnaround after a change of ownership. As part of the turn around they were outsourcing many of the core banking activities to third parties, in this specific case they were outsourcing their residential mortgage business. This was made up of two clearly separate businesses due to the failure to integrate a previous acquisition. We were called in immediately after the 10 year outsourcing deal was signed to carry out a review to ensure that the programme was set up for success.
The Approach
After an initial planning period we carried out a first round of focus interviews and a document review with both the Bank and their chosen outsource partner. This was then followed up by more detailed interviews based upon the initial findings. At the end of the engagement we developed a report for the Programme Director to present to the Board with a series of recommendations on how to improve the likelihood of success. Our focus was around the governance and planning of the immediate transition and subsequent 10 year transformation programme.
The Outcome
Due to the drawn out and bruising commercial negotiations that had led up to the outsourcing contract, relations between the bank and the outsourcing partner were strained. In addition, none of the key programme roles in either the bank or the outsourcing company were being carried out by employees or people with a long term interest in the outcome. Indeed, the next level of reporting outside the programme in the bank and the outsource company was also to consultants/interims. This was being changed as roles were backfilled after contract signature, albeit slowly. Both organisations were running a geographically separate PMO with incompatible IT and reorganising this to a single delivery team and PMO was an early recommendation. Another recommendation was to separate out as much as possible the management of commercial issues between the companies and the delivery of the programme as a "joint team" as both companies had a vested interest in successful delivery. A series of concrete proposals were made to change programme behaviours, not least in terms of transparency and accountability. Follow up after the initial assurance report was assigned to the bank's consultants.
A UK retail bank with a long history was carrying out a turnaround after a change of ownership. As part of the turn around they were outsourcing many of the core banking activities to third parties, in this specific case they were outsourcing their residential mortgage business. This was made up of two clearly separate businesses due to the failure to integrate a previous acquisition. We were called in immediately after the 10 year outsourcing deal was signed to carry out a review to ensure that the programme was set up for success.
The Approach
After an initial planning period we carried out a first round of focus interviews and a document review with both the Bank and their chosen outsource partner. This was then followed up by more detailed interviews based upon the initial findings. At the end of the engagement we developed a report for the Programme Director to present to the Board with a series of recommendations on how to improve the likelihood of success. Our focus was around the governance and planning of the immediate transition and subsequent 10 year transformation programme.
The Outcome
Due to the drawn out and bruising commercial negotiations that had led up to the outsourcing contract, relations between the bank and the outsourcing partner were strained. In addition, none of the key programme roles in either the bank or the outsourcing company were being carried out by employees or people with a long term interest in the outcome. Indeed, the next level of reporting outside the programme in the bank and the outsource company was also to consultants/interims. This was being changed as roles were backfilled after contract signature, albeit slowly. Both organisations were running a geographically separate PMO with incompatible IT and reorganising this to a single delivery team and PMO was an early recommendation. Another recommendation was to separate out as much as possible the management of commercial issues between the companies and the delivery of the programme as a "joint team" as both companies had a vested interest in successful delivery. A series of concrete proposals were made to change programme behaviours, not least in terms of transparency and accountability. Follow up after the initial assurance report was assigned to the bank's consultants.