3 in 4 banks outsource jobs overseas

No wonder 43% of people in transactional roles lose their jobs to foreigners.

According to a release by recruitment firm Robert Half, three quarters of banks and finance companies in Singapore have embraced ‘offshoring’ and currently outsource parts of their operations overseas in order to achieve cost savings and to access talent not available locally.

This is according to research revealed today by finance and accounting specialist recruitment firm, Robert Half, based on a survey of 150 senior business leaders within the banking and financial services sector in Singapore.

The survey found that offshoring is widespread among companies in the banking and financial services sector regardless of size, with 91 per cent of large firms, 74 per cent of medium firms and 73 per cent of small firms relocating some of their business functions from Singapore to another country.

The functions being sent offshore are predominantly the more transactional roles such as accounts payable and receivable, as well as payroll.

Deciding whether or not to outsource a particular business function is one of the critical decisions businesses of all sizes have to make. According to the survey, the five functions most commonly outsourced overseas are:

1. Accounts payable/ receivable management (43 per cent)
2. Payroll (23 per cent)
3. Billing and invoicing (22 per cent)
4. Financial accounting (16 per cent)
5. Financial reporting ( 15 per cent)

Stella Tang, Director of Robert Half Singapore said: “Offshoring is now widespread in the banking and financial services industry due to the international scope of the industry and business. In Singapore, the drive to offshore comes from the need to keep costs down, as well as the inability to recruit staff to perform certain accounting and finance functions locally.”

“Singapore continues to act as a hub for the regional and global operations of many companies. Decision makers based in Singapore manage clusters of employees in a range of offshore locations. The various business functions these offshore functions perform are shared or exchanged between the countries where the company operates.”

“The work sent overseas tends to be the transactional parts of the business, and therefore demand in Singapore remains high for skilled individuals with strategic and decision making experience,” Ms Tang said.

Benefits of Offshoring

The survey found that firms which offshored their services reaped the following benefits:
· Lower operating costs (52 per cent)
· Access to staff resources not available locally (39 per cent)
· Reduction of capital expenses (26 per cent)
· Increased organizational flexibility (25 per cent)
· Improvement in time to market (23 per cent)

Small and medium-sized enterprises (SMEs) are more likely to benefit from the cost savings of offshoring (52 per cent and 56 per cent respectively). Accessing talent that is unavailable in Singapore is the top benefit for large companies (80 per cent). The ability to focus on core competencies is another key benefit for large firms (40 per cent).

“While the SMEs are more concerned with managing costs, large enterprises are more concerned with solving talent shortages. By offshoring some of their business functions, large firms can concentrate on the more strategic functions that provide the greatest benefits to their customers,” Ms Tang said.

Disadvantages of Offshoring

There are also several detriments with offshoring that enterprises are concerned with:
· Quality of service/product is compromised (38 per cent)
· External risks e.g. geopolitical instability, intellectual property loss (28 per cent)
· Over reliance on another company for delivery (28 per cent)
· Impact on internal staff e.g. turnover, lack of team spirit (22 per cent)
· Social responsibility/ ethical issue (20 per cent)

Ms Tang said the main challenge of offshoring is ensuring the quality of the services and products delivered.

“While some companies mitigate offshoring risk through evaluation and quality assurance procedures and testing, the disparity in service levels has resulted in some companies having to move the offshored functions back to Singapore.”

Ms Tang reassured new graduates and job seekers looking to enter the financial services sector. “Although offshoring is widely practised, there is still a demand for financial services talent in Singapore. Candidates who have technical knowledge and ability, as well as strong interpersonal and communication skills are highly sought after by companies,” Ms Tang said.