Industry news

A study released by the Wales Audit Office highlighted failings within the public sector which undermined attempts to achieve value for money.

The study which looked at public spending on consultants found that while savings had been achieved, opportunities were missed which saw public sector departments fail to capitalise on other large million-pound cost savings.

A combination of a failure to adopt good practice, poor data and inefficient collaboration resulted in greater savings being missed from government spending over 2010-2011, with an estimated £23 million lost from potential further savings.

In a statement Huw Vaughan Thomas, auditor general for Wales, said consultants: “are risks if they are not managed effectively. Although expenditure on consultants has reduced since 2007-08, public bodies need to adopt the good practice”.

HMRC drives savings as a savvy customer

The Metropolitan Police’s technology strategy is to be reviewed by the London Assembly in order to analyse the impact of reduced budgets on services.

The review will attempt to understand the service level impact of goals to achieve £42 million in technology savings in 2014-15. High savings are expected to be achieved from contract renegotiation.

The Metropolitan Police’s future strategy includes plans to roll out mobile devices to officers in order to facilitate mobile working, increased flexibility and a reduction in paper work.

The London Assembly will attempt to realise best practice over the coming weeks by speaking to industry specialists, regarding new technology and its potential impact on police service.

Justice Minister brands the justice system’s use of IT a ‘terrible failure’

Centrica has reported operating profits of £2.7 billion with a 14 percent increase. Centrica owned British Gas also announced strong growth with an 11 percent increase in profits, reaching over £600 million.

Centrica has also experienced setbacks, including the scrapping of a bid for the construction of a series of new UK nuclear power stations.

The company stated that it is seeking to increase expansion in North America , with a focus on shale gas extraction.

Despite criticism of British Gas’ profit announcement after the company raised gas and electricity prices over the winter, the company defended its position. Sam Laidlaw, Centrica's chief executive, said: “It's important that Centrica makes a fair and reasonable return so that we can continue to make our contribution to society and to invest. Last year we incurred a tax charge of over £1bn and invested over £2bn to secure new sources of energy for the UK, well in excess of our profits."

Expectations turn to China for future power as Centrica pulls out of nuclear project

Ofcom have applied to the European Commission to force BT to reduce the price of its high-speed line network services.

The move follows the regulators view that there is insufficient price competition within the telecommunications market, in receiving permission from the EU, Ofcom will pressure BT into reducing prices by around 8 percent over the next three years.

The price reduction would be aimed at services outside of London, where competition is stronger. The EU commission is expected to rule on the application within a month. The application comes after fears of a lack of competition with BT’s dominance of EU supported superfast broadband contracts across the UK.

BT secures a further two superfast broadband projects

In a statement Ofcom said the move would: “help ensure the UK has a backbone of high-speed business networks capable of supporting not only companies, but also consumer services that ultimately rely on these networks, such as superfast broadband and mobile video streaming."

In response BT said: “We believe Ofcom’s decisions to regulate very high bandwidth Ethernet and optical services outside of London for the first time is mistaken", adding "We provided clear evidence to Ofcom that the market is highly competitive and that there is no market failure that needs regulatory intervention”.

Technology spending has reached a new peak with over £1 billion of venture capital was invested in technology in 2012, the highest amount since a peak in 2001.

According to research from corporate finance firm Ascendant, 2012 saw around a 28 percent increase in investment from that in 2011, with the internet sector receiving the greatest investment with a total of £456 million.

The high levels of technology investment come as the coalition government seek to develop the UK IT industry and focus on technology development with new hub facilities and ‘Tech City’ start-up projects.

Government provides £50 million for Tech City development

.

The Government Procurement Service (GPS) has launched the first national public sector procurement framework for insurance services alongside a buying consortium.

The GPS alongside buying consortium Pro5 have entered into a four-year agreement worth £850 million. The framework is designed to allow public sector departments to have easy access to insurers, without length procurement times and avoiding duplication.

Over 40 insurers are available through the framework with services available including brokerage services, insurance underwriting, claims and risk management.

David Pyle, insurance category lead at GPS: “This is a relatively new area for many suppliers who are looking to expand the scope of their services into the public sector. We have collaborated with Pro5, the insurance market and our customers to deliver not only the first, but the best possible competitive and value-for-money solution for all concerned.”

Paul Smith, director Pro5, said of the framework: “The demand was there, but surprisingly nothing was already in place. Now, with the ability to buy insurance services under a single agreement, it will help public sector bodies reach their efficiency and financial savings targets”.

London council authorities create procurement IT framework

One in five mobile broadband subscribers in the world will be using 4G connections by 2017 as the number of global mobile broadband connections increase.

At present 4G connections are used by one in 25 mobile broadband subscribers.

Connections are predicted to increase in number by 26 percent over the next five years, with numbers reaching over five billion by 2017, according to figures in a report by GSMA.

Data usage is also expected to rise, multiplying by over 10 times the levels reported in 2012, with data predominantly relating to social media activity.

Near-field communication (NFC) mobile payments are being pushed by a global alliance between Samsung and Visa.

The alliance will see Visa tie its payWave technology with the next generation of Samsung NFC-equipped devices. The move comes as Visa estimates that over half of all Visa payments will be made via NFC by 2020.

Visa is also moving to partner with financial institutions in a bid to accelerate NFC uptake and other mobile payment solutions.

NFC technology has already seen uptake in Asia, with countries such as Japan employing the technology commonly in the high-street.

NOA Special Interest Group: Outsourcing Works in BFSI

While suppliers and end-users are familiar with the traditional elements of outsourcing within BFSI, new developments in technology and EU regulation have contributed to new obstacles on the horizon that need to be analysed carefully.

The NOA Special Interest Group (SPG) conference on Outsourcing Works in the BFSI was designed to discuss and promote debate regarding the employment of outsourcing within the financial services industry, including regulatory compliance, legislation, current and future developments.

The two speakers were Craig Rattray, partner at Olswang and involved in commercial sourcing, and Philip Allery, Senior Legal Adviser at the Phoenix Group. The two speakers focused on the regulatory requirements currently in place and expected future regulatory requirements including: what are the main restrictions to outsourcing within the BFSI sector? How can these be circumnavigated? How to obtain SYSC 8 compliance in contracts and ensuring data security?

Within the Phoenix group, Philip described how the pension fund consolidator outsources heavily and is involved in the administration of 6.8 million policies, with six major life and pension suppliers including; Capita, Diligenta and HCL. Philip used the analogy of a driving theory test, despite being a driver of longstanding he could still fail the test, being able to do everything, but being unable to say why he was doing it. Long term finance industry businesses can be in a similar position. Old regulation is now becoming heavily outdated and a new regime is now needed. When the guidelines and regulation was created around ten years ago a lot of present day outsourcing methodology did not exit. The landscape has changed and the guidelines and regulation need to be updated.

Philip described of the new regulatory structure, with the Bank of England’s Policy Committee having a dichotomous structure, with the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA). The PRA carries out micro prudential regulation of around 3000 firms, which are judged as being to systemically important to fail. The FCA on the other hand is the regulator for all business firms and prudential regulator for all non-PRA regulated firms. If you fall into both regulatory regimes, like the Phoenix Group, then you will be faced with varying compliance demands. The PRA and FCA suffer from a lack of effective communication and take different approaches, which can make compliance expensive when one authority enforces a piece of regulation while the other does not.

Philip described how the FSA have now started to move against senior management targeting them over non-compliance, with leanings towards make senior managers personally liable, in a similar manner to that of those within the health and safety sector. The Phoenix Group are predicting increasing investigations into conduct type enquires of how financial businesses are run, and that larger fines can be expected from the new regime with reduced tolerance of repeat offenders.

The SPG then looked at the development of SYSC otherwise known as Senior Management Arrangements, Systems and Controls requirements. The full details of the changing face of SYSC regulation can be found in detail on the event slides 10-13, the speakers focused on the key points surrounding the necessity of safeguards during delegation and overall record accuracy.

The FSA’s Senior Management Arrangements, Systems and Controls requirements:

– outsourcing is an operational risk as a result of potential loss of direct control

– firms that outsource cannot delegate their regulatory responsibility

– firms should take steps to obtain sufficient information from its contractor to enable it to assess the impact of outsourcing on SYSC

Philip pressed that users should be: “trying to understand warning signs earlier on. Triggers, objective measures, and drops in coverage before termination.” He however acknowledged that it can be difficult to gather information in many cases, due to natural competitive needs, saying: “It can be hard to gain information from suppliers, they don’t want to disclose information, including profit margin.”

In summarising the end user’s position, regarding finance regulation, Philip stressed that the FSA wanted a harmonised rule structure, despite it being unlikely that this will ever happen. This is because economic pressures and the recession have changed supplier attitudes, with increasingly large fees being spent on regulation and legal advice and increasing “hesitancy” by users, to outsource.

Craig Rattray of Commercial Sourcing, discussed the hope that increasing requirements from regulation affecting BFSI companies would not restrict business. With SYSC there is an obligation to notify the FSA of major outsourced actions. Users need to factor in how long it takes suppliers to get authorised, especially in a small time frame. If you break up contracts into small agreements then SYSC is less applicable in such contracts. Users and suppliers should be aware that they should be monitoring areas that are not included within regulation.

“We often ask users as to why their asking for regulatory compliance in particular areas, is it commercial or compliance based” said Craig Rattray, adding, “it needs to be rationalised so that rules can be focused”. This has the effect of allowing the supplier to understand and remove needless obstacles that the client has imposed. If clients are able to rationalise checklists with the help of a persuasive argument, they can reduce the cost of procurement through legal fees and obstacle removal.

In an open discussion with attendees, including both end users and suppliers, speakers agreed that it was inherently difficult to try to understand the finical position of suppliers, with successive large organisations having succeeded in hiding major damages and hidden losses. As an addendum to the discussion, all sides suggested that an area for future discussion would focus on how those working in the financial industry should handle information and data storage, with new legislation raising concern and the increasing potential for penalties.

-------------------

For the full write up please click below:

Outsourcingworks_in_BFSI_(2).docx

The Sterling fell to a two-year low late on Friday in US trading, to $1.5163 after the announcement by credit ratings firm Moody’s of its intention to downgrade the UK.

Today will be the first opportunity for overseas markets including those in Asia and Europe to respond to the credit downgrading.

Despite the credit downgrade, analysts are predicting that the move will have little impact on the impression of UK’s stability by overseas markets, instead the ratings change is more likely to add fire to UK internal political debate.

The loss of AAA status has been experienced by many western countries, with the USA losing it rating in 2011 to Standard & Poor’s and France’s to two agencies. Many UK economists have been actively pushing for a weakening of the sterling in order to increase overseas trade.