FUND ADMINISTRATION

Irish fund administrators warned of outsourcing risks

The Central Bank of Ireland has cautioned Irish fund admins outsourcing their activities to be wary of the risks involved.

By Paul Walsh paul.walsh@strategic-i.com March 14, 2017 2:18 PM GMT
Irish fund administrators outsourcing their services should pay particular attention to concentration risks according to guidance from the Central Bank of Ireland.

A letter published on the Central Bank of Ireland’s website revealed various recommendations for Irish administrators who are outsourcing their activities.

The advice suggests firms should pay particular attention to concentration risks when outsourced services are conducted by a limited number of service providers or are concentrated in limited geographic locations.

The guidance also suggests that limits should be considered on a firm’s total level of outsourced activities and the potential risks arising from outsourcing multiple activities to the same external provider.

In addition, the Central Bank of Ireland reveals that outsourcing among larger Irish fund administrators is “extensive.”

Levels of outsourced fund administration activities currently stand at between 48% and 61%, based on data from the five administrators forming part of the review.

Irish administrators are also advised to consider whether any benefits of diversifying their offerings would outweigh the estimated cost risks.