N° 2005-09 Juin 2005 Guillaume Daudin* Jean-Luc Gaffard ...

Georges Pujalsoutsourcing should therefore interfere to the lowest possible degree in the entrepreneurialfreedom of financial services firms. Limitations need to be justified by increased risk andshould be restricted to the minimum necessary to achieve the regulatory aim. We also suggestthat offshore outsourcing should be studied further. Indeed, managing compliance risk isparticularly difficult when offshoring is used. In order to avoid a duplication of inspection andcontrol of outsourced services, supervisors should conclude cooperation arrangementsaccording to which the authority, which has best access the provider, will become active. Aduplication of supervision by different authorities has absolutely to be avoided.Concluding remarksInternational relocation is a very important issue for European financial servicesindustry and it will continue to increase in the next years. Technological progress and theimperative to cut cost within a rapidly changing markets (increasing competition, pressure ofmarket consolidation…) require that financial firms more and more focus on their specificfield of competence. Tasks and activities, which are not in the focus of business policy orwhich can be provided at considerably lower cost by foreign entity, are more and moredelegated.Then, offshoring is having an effect on the industry and is contributing to the rise ofnew business models. Offshoring has involved a new and potent competitive dynamic that islikely to reshape the world-wide financial services industry for the rest of this decade andbeyond. Offshore outsourcing s also creating a global division of labour that demands newoperating models and new business structures that is forcing financial institutions to rethinkthe way they do business. Nevertheless, financial services institutions must move cautiously.Indeed, while offshore outsourcing presents all firms with important challenges,financial services firms face two interrelated challenges which are being heightened as theypush outsourcing further into their business: firstly, the need to resolve the increasingly largeregulatory requirements governing outsourcing and responsibility for compliance; secondly,the need to manage the risks associated with increasingly complex outsourcing arrangements.The latter issue has recently led to important developments in the supervision of financialservices firms, particularly banking institutions.Generally speaking, the offshoring debate will continue to rage for some time to comein the industrial countries. The challenge for policymakers is to make sure European peoplehave the skills they need to compete successfully in the global economy.47