Following the release of the Outsourcing Working Group (OWG) report on December 9 2013, an industry event was held on January 24 where members of the OWG, asset managers, consultants and service providers as well as representatives from the Financial Conduct Authority (FCA) convened to discuss the report’s findings.

The OWG report outlined guiding principles and considerations that asset management firms should take into account depending on the nature, size and scope of their outsourced arrangements. The OWG was split into three work streams focusing on oversight, exit planning and standardisation.

General consensus was that the majority of the principles were achievable and that asset managers needed to digest the principles and how they would implement them, said Susan Wright, senior regulatory adviser at the Investment Management Association.

“Having the FCA attend was very useful as it gave the attendees an opportunity to ask any questions after having seen the report,” said Wright. “One of the key points to emerge from the update meeting was confirmation from the FCA that if a service provider fails on a Friday the asset manager must implement its exit plan on the Monday morning.”

Wright said that firms will need to consider exit plans with each of their service providers as well as oversight procedures. “The FCA expects firms to have or be drawing up some sort of exit plan, have a compliance monitoring plan showing oversight of that provider and then really be engaged with their service providers to consider the standardisation principles,” she explained.

She added that the FCA does not intend to undertake another thematic review of outsourced activities, instead, the FCA will ask several questions on outsourced activity when they visit firms during their normal supervisory visits.

“If firms provide answers that satisfy the FCA, then you could argue that the OWG has done its work, but if there are unsatisfactory answers then it is quite possible that more would need to be done. I hope it is the former,” she said. “An OWG steering group is expected to re-convene in six months’ time to discuss any trends across the industry and liaise with the regulator.