2 May 2022
Procurement frauds

How can managed services spark a compliance and ethics transformation

Authors
Arpinder Singh

EY Global Markets and India Leader, Forensic & Integrity Services

Leading forensic accountant and veteran expert witness. Advising global clients on compliance, anti-corruption and corporate governance. Disruptive thinker. Technology aficionado. Author.

Amit Rahane

EY India Forensic & Integrity Services Partner

Forensic investigator and purpose driven leader. Committed to building data-centric compliance programs. Problem solver.

2 May 2022

Collaborating with a strategic partner can help organizations obtain competencies and drive value.

In brief

  • Incorporating a managed services approach strategy for regulatory productivity, cost management and agility is evolving to become an essential part of it.
  • The baseline of managed services garnering the spotlight is rooted in efficiencies, exceptional talent, and technologically savvy methodologies.
  • These can be brought to the table by collaborating with strategic partners.

As the global regulatory landscape embarks on a journey of compliance transformation in a post-pandemic world, innovation has become the name of the game for organizations. 

To understand the market sentiment and need for a managed services transformation around the world, our Forensic & Integrity Services team conducted a series of LinkedIn polls, which drew over 5000 responses. One of the primary themes that emerged from the poll was the rising pressure on compliance, risk and legal departments in today’s evolving regulatory landscape. The new normal saw several new regulations being rolled out, impacting large as well as small businesses. For example, the US banking regulators issued several International Financial Reporting Standards to mitigate the impact of COVID-19 and the European Union’s Whistleblowing Directive has outlined regulations for companies operating in the region on the implementation of whistleblowing procedures. 

Organizations will have to understand as well as adhere to these regulations and amendments, which can be an arduous task given the applicability, jurisdictions, complexity, and liabilities that may be involved. With the changing environment, compliance, ethics, and legal department can face a fair number of hurdles. Unsurprisingly, the poll highlighted that 51% of the respondents said that effective implementation is a huge challenge when it comes to these departments. Some of the reasons here may include lack of skillsets within the team, as well as difficulty in maintaining operational efficiency and quality.

51%

Effective implementation is a huge challenge for compliance, ethics, and legal departments

High cost of technology, absence of integrated platforms that facilitate seamless exchange of data, lack of data tracking mechanisms and de-centralization of data can slow down the digitization journey of business functions including compliance, ethics and legal. Many organizations tend to rely upon their compliance departments for risk management, proactive detection and mitigation of fraud, regular monitoring, digital forensics services and reporting for improved operations as well as many other procedures, which can weigh down heavily on teams. In such scenarios, a managed services strategy can be conducive as it can operate in a flexible manner, allowing for greater agility to provide innovative solutions, risk mitigation and cost control. This highlights the importance of hosting micro-services platforms with various capabilities such as custom build workflows, dashboard reporting and functionality, and global accessibility.

The poll also stated that 97% of the respondents agreed that there is a need for organizations to conduct due diligence or background checks before onboarding a new vendor. Further, 59% of the respondents believed that an experienced external provider specializing in robust third-party checks can add tremendous value. Organizations can benefit from exploring a managed services strategy that utilizes a strong third-party due diligence team with deep skillsets, driven by technology, possessing the capability to leverage from their global experience and leading client centric practices. Collaborating with a strategic partner can give organizations an opportunity to obtain these competencies in one place, reaping the benefits of a long-term arrangement that can maintain the domain knowledge acquired, motivate all teams involved to continuously improve, and most importantly, drive value.

59%

An experienced external provider specializing in robust third-party checks can add tremendous value

The advantages brought by an independent and strategic service provider was another key area that was highlighted in the poll. 90% of the respondents believed that compliance, legal and ethics teams can benefit through an external service provider that can bring efficiency in processes - a crucial element given the complexity of these functions. Compliance departments are typically seen as cost centres and are under constant pressure to optimize costs. An external service provider as a strategic partner can drive a bold transformation from within not only in terms of cost control but also enhance regulatory productivity, improve performance, strengthen controls, leverage technology, and deliver greater returns on investment. 

90%

Compliance, legal and ethics teams can benefit through an external service provider that can bring efficiency in processes

The future of managed services

When non-strategic functions are merged with or outsourced to a strategic partner, it is important for the service provider to take on the responsibility of providing a specific set of services to its clients, contractually agreed upon. An external service provider-led managed services strategy can easily transform into an extended arm of organizations, while they still retain the control and direct oversight – without the operational strains.

Summary

As multinational, global corporations leverage the implementation of new age solutions to accelerate compliance transformation, and solve complex ethics and legal challenges, managed services have grown to fit in the equation seamlessly.

About this article

Authors
Arpinder Singh

EY Global Markets and India Leader, Forensic & Integrity Services

Leading forensic accountant and veteran expert witness. Advising global clients on compliance, anti-corruption and corporate governance. Disruptive thinker. Technology aficionado. Author.

Amit Rahane

EY India Forensic & Integrity Services Partner

Forensic investigator and purpose driven leader. Committed to building data-centric compliance programs. Problem solver.