The global banking sector is currently undergoing fundamental changes. Banks face new challenges created by socio-economic and political developments and the potential of new information and communication technologies. Competition has risen to formerly unknown levels and active management of costs has become an ongoing tasks.
Unlike the manufacturing industries most banks still cover large parts of their value chain by themselves. Lead by Anglo-Saxon institutes global banks have started in recent years to use the advantages of globalization by splitting up their value chains and by offshoring selected functions to countries offering wage differentials. According to experts banks have just started to create their global sourcing model, so that the offshoring volume is projected to increase further.
While most banks have started their offshoring initiatives with IT functions, business process offshoring and even knowledge process offshoring have now become the main drivers of the move to the key offshoring locations like India, China and Eastern Europe.
Banks from Switzerland have been spectators to the global move towards a global delivery model for many years. Only its two large global banks – UBS and Credit Suisse – have started offshoring initiatives yet trying to catch up with their global competitors. They face challenges especially from the legal and regulatory side, which are specific to offshoring from Switzerland, and have to balance cost discipline with keeping the high standards in quality, security and confidentiality, which are the base for the high reputation of the Swiss banking market.
The primary objective of this paper is to give an overview on the current status as well as on trends in business process offshoring by banks in general and on offshoring from the Swiss banking market specifically. As Swiss institutes lag the global offshoring trend, the specific conditions for offshoring from Switzerland will get analyzed.
Secondary objective of this paper is to give a high-level introduction to the key issues in business process offshoring:
- What are the organizational options in offshoring?
- Which banking processes are suitable for offshoring and what are the criteria for identifying them?
- What are the main offshoring locations and criteria in the site selection?
- What are the drivers, but also risks and benefits of offshoring?
Table of Contents
1 Introduction
1.1 Current Situation
1.2 Objective
1.3 Structure of Analysis
2 Business Process Offshoring
2.1 Definition of relevant terms
2.2 Organizational options
2.3 Main offshoring locations
3 Offshoring by banks
3.1 Drivers for market growth in business process offshoring
3.2 Benefits
3.2.1 Cost savings
3.2.2 Access to new talent pools
3.2.3 Market access
3.2.4 Process optimization
3.2.5 Further benefits
3.3 Risks
3.4 Potential business processes for offshoring
3.4.1 Criteria for selecting processes
3.4.2 Processes offshored by banks
3.5 Strategic options for banks
4 Specific challenges for offshoring banking processes from Switzerland
4.1 Legal restrictions to offshoring from Switzerland
4.2 Regulatory restrictions to offshoring from Switzerland
4.3 Potential strategies to deal with the legal and regulatory restrictions
4.4 Impact on reputation
4.5 Language barriers
5 Current status of business process offshoring by banks
5.1 Status of business process offshoring by banks globally
5.2 Status of business process offshoring by banks from Switzerland
5.2.1 Overall status of offshoring by banks from Switzerland
5.2.2 Offshoring at UBS
5.2.3 Offshoring at Credit Suisse
5.2.4 Offshoring at other banks
6 Summary and outlook
Objectives and Topics
This paper examines the evolution and current state of business process offshoring in the global banking sector, with a specific focus on the unique challenges and strategies encountered by Swiss financial institutions. The analysis aims to provide a comprehensive overview of drivers, risks, benefits, and strategic approaches associated with relocating banking processes offshore.
- Drivers and market trends for business process offshoring in banking.
- Strategic classification of banking processes suitable for offshoring.
- Legal and regulatory implications of data privacy and secrecy in Switzerland.
- Comparative analysis of offshoring activities between global banks and Swiss institutions like UBS and Credit Suisse.
- Evaluation of future prospects for global service delivery models in banking.
Excerpt from the Book
3.4.1 Criteria for selecting processes
The starting point of any offshoring decision should be an analysis of the bank’s value chain based on two criteria (see figure 5):
1. Which skills or competences differentiate a company compared to its competitors from a customer point of view and should thus be regarded as core processes of strategic relevance? All non-core processes are basically apt for offshoring. Customer-related processes should be analyzed thoroughly though, as changes in these processes may have significant impact on the customer relationship.
2. What is the degree of specificity of a service? Non-specific commoditized functions are more suitable for provision by outside vendors and also reduce training periods for new offshore staff. Vendors profit from standardizing their processes, so that the price offered by the vendor for highly specific processes may not be attractive. For such specific processes captive offshoring would thus be the favorite option.
Summary of Chapters
1 Introduction: This chapter introduces the shift in the global banking sector toward a global delivery model and sets the objective to analyze offshoring trends, particularly for Swiss banks.
2 Business Process Offshoring: This chapter defines key offshoring terminology, explains organizational models such as captive and outsourced setups, and discusses site selection criteria.
3 Offshoring by banks: This chapter details the market growth drivers, the benefits and risks of offshoring for banks, and outlines how specific banking processes can be evaluated for offshore suitability.
4 Specific challenges for offshoring banking processes from Switzerland: This chapter explores the legal, regulatory, and reputational hurdles unique to Swiss banks, including strategies to maintain compliance and data secrecy.
5 Current status of business process offshoring by banks: This chapter provides a comparative overview of offshoring activities globally versus those undertaken by Swiss banks like UBS and Credit Suisse.
6 Summary and outlook: This chapter synthesizes key findings regarding the future of offshoring and concludes that it is a strategic necessity for remaining competitive in the banking industry.
Keywords
Offshoring, Business Process Offshoring, Banking, Switzerland, Outsourcing, Captive Offshoring, Nearshoring, Knowledge Process Offshoring, Strategic Management, Risk Management, Data Protection, Swiss Banking Secrecy, Cost Savings, Global Delivery Model, Talent Acquisition.
Frequently Asked Questions
What is the primary focus of this research?
The paper examines the offshoring of business processes within the banking sector, specifically investigating how global trends apply to Swiss banks given their unique regulatory environment.
What are the central themes discussed in the paper?
Key themes include the strategic selection of banking processes for offshoring, organizational models (captive vs. outsourcing), and the management of risks such as legal constraints, reputation, and language barriers.
What is the main objective of the study?
The objective is to provide a comprehensive overview of current status and trends in bank offshoring, with particular emphasis on identifying why Swiss institutes have historically lagged behind their global peers.
Which scientific methods or analytical approaches are used?
The study utilizes a descriptive and comparative analysis of the banking value chain, assessing organizational maturity, cost-benefit models, and benchmarking the offshoring strategies of major institutions like UBS and Credit Suisse.
What is covered in the main body of the text?
The main body covers foundational offshoring definitions, drivers and risks for the banking sector, criteria for process selection, and an in-depth analysis of the specific challenges faced by Swiss banks.
Which keywords best characterize this work?
The work is best characterized by terms like business process offshoring, banking strategy, regulatory compliance, Swiss banking secrecy, and global delivery model.
Why do Swiss banks face unique challenges in offshoring compared to other countries?
Swiss banks are subject to strict banking secrecy and federal data protection laws, which mandate high levels of security and confidentiality, making the legal and regulatory compliance process more complex than in many other jurisdictions.
What does the study conclude about the future of offshoring in banking?
The study concludes that offshoring is not merely a temporary trend but a fundamental shift, and that banks—including those in Switzerland—must embrace a global delivery model to remain competitive as the global talent pool changes.
- Quote paper
- Alexander Beutler (Author), 2008, Offshoring of Business Processes by Banks from Switzerland, Munich, GRIN Verlag, https://www.grin.com/document/123469
