OM-3.1.1

This Chapter sets out the CBB's approach to outsourcing by licensees. It also sets out various requirements that licensees must address when considering outsourcing an activity or function.

OM-3.1.2

In the context of this Chapter, 'outsourcing' means an arrangement whereby a third party performs on behalf of a licensee an activity which was previously undertaken by the licensee itself (or in the case of a new activity, one which commonly would have been performed internally by the licensee). Examples of services that are typically outsourced include data processing, cloud services, customer call centres and back-office related activities.

OM-3.1.3

Most of the Directives in this Chapter are concerned with situations where the third party provider is outside the licensee's group. Section OM-3.8, however, sets out the CBB's requirements when a service is outsourced to a company within the licensee's group.

OM-3.1.4

The requirements in this Chapter only apply to 'material' outsourcing arrangements. These are arrangements that, if they failed in any way, would pose significant risks to the on-going operations of a licensee, its reputation and/or quality of service provided to its customers. For instance, the outsourcing of all or a substantial part of functions such as customer sales and relationship management, settlements and processing, IT and data processing and financial control, would normally be considered 'material'.

OM-3.1.5

Management should carefully consider whether a proposed outsourcing arrangement falls under this Chapter's definition of 'material'. If in doubt, management should consult with the CBB.

OM-3.1.5A

For outsourcing services that are not considered material outsourcing arrangements, licensees must submit a written notification to the CBB before committing to the new outsourcing arrangement.

OM-3.1.6

The requirements in this Chapter only apply to outsourcing arrangements entered into after May 2003. In the case of pre-existing outsourcing agreements, the CBB requires licensees to apply the requirements of this Chapter to the fullest extent possible when these arrangements are subsequently renewed.

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