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A sourcing strategy for the middle offices in financial institutions

Author

Listed:
  • Hai Wang

    (Associate Professor, Sobey School of Business, Saint Mary’s University, Nova Scotia, Canada)

  • George L. Ye

    (Associate Professor, Sobey School of Business, Saint Mary’s University, Nova Scotia, Canada)

Abstract

This article examines the strategies of sourcing the middle office functions in financial institutions. While some functions, in particular the back office functions in financial institutions are popularly and successfully outsourced or co-sourced, it may not be appropriate to do so for sourcing the functions of middle offices. Outsourcing or co-sourcing of the middle offices implies contracting out the risk management function of a financial institution partially or completely. This may reduce the effectiveness of risk management implementation and may potentially expose the institution to great risk. This article compares different strategies, namely outsourcing, co-sourcing, and shared services; and shows that shared services has many advantages over the other two strategies.

Suggested Citation

  • Hai Wang & George L. Ye, 2015. "A sourcing strategy for the middle offices in financial institutions," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 3(6), pages 26-32, December.
    • Handle: RePEc:lrc:lareco:v:3:y:2015:i:6:p:26-32
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    More about this item

    Keywords

    Financial institution; Middle office; Risk management; Sourcing.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management

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