Boards of directors are contending with an evolving list of challenges when determining risk management strategies for their organizations. Members must consider risks surrounding regulatory changes, advanced technology adoption and personnel-related issues.
Traditionally, the board might recommend maintaining an in-house model to manage risks, but that may not be completely realistic anymore. Risks are coming quicker and from many more directions and moving people from their core competency to focus on those challenges may not be the best use of time and resources.
If developing a function internally is no longer the right strategy, the alternative may be managed services. Managed services can provide flexible solutions to help you better address risks and capitalize on potential opportunities. A co-sourcing or business process outsourcing approach is a hybrid approach where you can maintain certain activities within a process internally and leverage an experienced external provider to support others, while a managed service strategy transitions an entire end-to-end process to a provider.
With the expansion of scalable managed services solutions in recent years, few limitations exist for how it can support and enhance critical functions throughout the business.
Managed services in action
When companies initially decide to implement a managed services strategy, the first step is a co-development process with their chosen vendor to determine what stays in-house, what is moved into a co-sourcing role and what may be targeted for a managed service approach. The following are examples of differing levels of managed services and the solutions they provide:
Managing compliance and elevating talent: Many companies only want to maintain a limited number of personnel in specific departments, such as tax. But regulatory pressures continue to grow and require increased attention, limiting the amount of value the function can add to the organization. However, companies can shift the high-risk regulatory demands into a managed services approach. With this strategy in place, companies can have experienced external resources to better address evolving regulatory concerns while allowing the internal resources to focus on initiatives to help meet corporate expectations.
Leveraging technical expertise for financial reporting: The ASC 842 lease accounting standard is highly technical, and many companies do not have the knowledge nor the people internally to manage the new guidelines. In those situations, organizations have chosen to utilize business process outsourcing to fill that gap and handle those responsibilities and limit potential risks. With that new function in place, companies can feel more confident that financial statements are right, rather than finding errors during the audit process.
Modernizing critical functions: When a longtime executive departs, opportunity exists to review departmental strategies and update the approach. When a new executive comes on board, time is often limited to get the function in line with modern processes. A managed services provider can help review, assess and implement a future-focused approach relying upon the provider’s technology and people to accelerate modernization, decrease costs and focus employees on value-added initiatives.
Taking a stronger security approach: Cybersecurity is a critical concern for boards, as the threat of a security or data breach carries with it reputational, and potentially financial, ramifications. Working with a managed services provider can typically provide more robust security tools and resources than companies have access to on their own. Strategies can often be deployed in-house or remotely, providing advanced solutions for critical areas including monitoring, patching, and threat identification and remediation.
What a provider offers
Working with a managed services provider in any capacity provides a host of benefits that can enhance specific roles within the company or entire business functions. Common benefits include, but are not limited to:
- Access to consistent resources
- Additional depth of qualified personnel
- Ability to scale resources and costs as necessary
- A predictable cost structure
- Access to advanced technology solutions
Boards can consider the impact managed services can have within an organization by evaluating what needs to be done in the future within specific functions, and how they may or may not be aligned to satisfy those demands, whether due to capacity, costs or complexity.
Demonstrated metrics and value
Effectively utilizing managed services is becoming a critical success factor for companies of all sizes and in all industries. The strategy can take smaller roles by supporting back-office functions or specific technology solutions, or it can fill an executive role or staff an entire department such as human resources or finance.
In addition, managed services enable detailed metrics about cost, time and quality, making the true value of the strategy easy to understand. Whether it’s quicker close times, improved reporting accuracy or increased cost savings, board members have the data to understand the health of the company and its risk exposure.
This article was written by Patrick Brennan, Andy Swanson and originally appeared on 2023-11-28.
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