Outsourcing
Outsourcing (Regulatory Requirements)
Definition
Arrangements where a regulated firm engages a third party to perform a function, service, or activity that would otherwise be undertaken by the firm itself. Regulatory frameworks require firms to conduct due diligence on service providers, maintain oversight and control, ensure business continuity, and notify regulators of material or critical outsourcing arrangements.
Regulatory Context
The EBA Guidelines on outsourcing arrangements and the FCA's SYSC requirements provide detailed obligations for financial institutions. Regulators are particularly focused on concentration risk where multiple firms rely on the same critical third-party providers.