Versions

 

OM-2.1.5

Licensees should assess whether the function/activity/process being outsourced is material based on an assessment of various factors including but not limited to:

(i) The importance of the business activity to be outsourced in terms of its contribution to income and profit and the risk of potential loss should the outsourcing service provider fail to perform the service;
(ii) The impact on the licensee's reputation and brand value, and on its ability to achieve its business objectives, strategy and plans if there are disruptions, irregularities, frauds or other adverse events occurring with outsourcing service provider;
(iii) The impact on business continuity should the outsourcing service provider fail to perform the service;
(iv) The impact on the licensee's customers, should the outsourcing service provider fail to perform the service or encounter a breach of confidentiality or security;
(v) The cost of the outsourcing as a proportion of total operating costs of the licensee;
(vi) The degree of difficulty, including the time taken, in finding an alternative outsourcing service provider or bringing the business activity in-house;
(vii) The aggregate exposure to a particular outsourcing service provider in case where a licensee outsources various functions to the same outsourcing service provider;
(viii) The ability to maintain appropriate internal controls and meet regulatory requirements due to operational problems faced by the outsourcing service provider;
(ix) The affiliation or other relationship between the licensee and the outsourcing service provider; and
(x) Any other factor that the licensee may consider appropriate for evaluating the materiality of an outsourcing arrangement.
Added: January 2020