Outsourcing Information Technology Functionalities For Risk Management In Financial Industry

The Impact of Information Technology on the Financial Industry

Question:

Discuss about the Outsourcing Innovation Research Technology.

The 21^st Century has brought about all embracing convergence when of communication, computing, knowledge as well as information. This will definitely change on the way individual live, think and even work (Duhamel, Gutiérrez-Martínez, Macias-Figueroa, Luna-Reyes & Picazo-Vela, 2017). The growth of the high speed networks, which has been coupled to the decline in the cost of the computing power has made application undreamed in the past. The changes which the new technologies have brought the financial sector an enormous in their impact on the employees, as well as the customers (Gobble, 2013). The financial sector has been gaining a competitive advantage due to the aspect of information technology advancement.

The information technology risk management has been a significant aspect when it comes to the risk management within a business. The information technology can be able to manage on any risk which has been associated to the information technology sector such as the desktop, networking or even perhaps in the computing (Duhamel, Gutiérrez-Martínez, Macias-Figueroa, Luna-Reyes & Picazo-Vela, 2017). The information technology has been incorporated in the financial industry over the years. In this report it intends to evaluate the risk management process which are associated to outsourcing of the key information technology functionalities that is within Aztek Corporation. Outsourcing will enable them to continue to thrive in the financial industry in Australia.  The organization has a portfolio of various project which they will implement with the view to automate on their system within their operations (Gobble, 2013). Some of the outsourcing functionality which they intends to undertake are desktop management or the application development to the 3^rd party along with the networks.

Aztek organization is a well-known business that operate the financial industry in Australia. The organization operates with other organization within the industry and sometimes they are exposed to many risk which are within the sector. The organization ensures that their reputation as well as integrity is maintained at all time within the various departments in the business (Willcocks & Lacity, 2016). Over the years the organization has been encountering stiff competition from the other financial firms which has made them lose a few clients to the competitors. The stiff competition which has been exhibited within the business has made them to change on their operating process. The information technology has been one of the vital technologies in the financial industry which make the business to automate on their processes. In the Australian sector it has encountered various information technology system to which have aided in the delivery of the information, as well as management of the inventory (Willcocks & Lacity, 2016). When Aztek organization outsource their critical information technology functions it would help them in the establishment of the wide client base.

The Benefits of Outsourcing Information Technology Functionalities

If Aztek organization adopt the information technology application in their business process they would be able to improve on their services to the customer and meets on their every needs. There are many corporations especially in the financial sector in Australia which have outsourced their information technology functionality from the 3^rd party (Willcocks & Lacity, 2016). This has helped them to diversify on the processes in the business consequently high profit margins. When a business achieves high profits they are able to reduce on their complexity level along with the dependence to the interest which has accrued over the years from their operations.

There has been great success to the financial sector in Australia, and the key for their survival has been the customer service. The loyalty of the customers has been determined through convenient as well as innovative delivery of the personal services. When Aztek organization adopt the IT functionality it would likely increase their values of the products from the savings they have had to the fixed deposits (Willcocks & Lacity, 2016). Moreover, this would also result to the improved annual product values to product which are of high value. The information technology can make their services more flexible, which creates new business clientele.

When Aztek outsource on some of their business processes they will be able to provide exceptional services especially introduction of e-payments methods which would enable them retain their existing clientele and be able to gain a significant number also (Mehan, 2008). This is a benefit to the organization since the clients usually want a one stop shop where they can access all the services and make payment to their convenience or at their own comfort. Outsourcing of the business functionality would lead to improvement of the quality of the services provided which would likely lead to formulation of the service culture within the business (Mercuri & Neumann, 2011). Moreover, it would contribute to achievement of the fast service delivery particularly in the sections of documentations for instance in billing (Willcocks & Lacity, 2016). The use of the information technology makes it possible to handle the queries of the customers quickly. As much as outsourcing of the IT functionality in the business bring forth some advantages there are also some challenges which it has brought. Some of the challenges is the issue of standardization of the products due to the fact that there is high specialized system which could lead to loss of vital information or even the system could be hacked and the system retained from the servers. Information technology ensures that the processes within the business can run without any interference which would enable the business to get high returns when they deliver the services (Willcocks & Lacity, 2016). Additionally, it is also worth noting that information technology in the financial sector has led to the development of the process which are automated and they have incorporated high level of security. The information technology has enabled the business to achieve value for the service they deliver to the clients (Nichols, 2014). Outsourcing of the major information technology functionality such as networks, and the desktop management would help in improving of the operational processes for instance development of the services, integration of the major stakeholders and the process development.

The Challenges and Risks of Outsourcing Information Technology

When Aztek outsources the information technology functionalities to their processes it help them achieve numerous benefits considering the organization is one of the leading financial service provider in Australia. Outsourcing of the IT functionality particularly from the 3^rd party is vital and this needs to be analyzed to be able to maintain security along with the operational processes running smoothly (Willcocks & Lacity, 2016). Outsourcing IT functionality such as network could help the business in their development of the network as well as an adaptive process of communication that is within the workplace which would enable them to monitor of the performance of each employee (Willcocks & Lacity, 2016). Networking technology would enable the organization to implement system such as enterprise management planning which has become a necessity to most of the organization to integrate to their business processes in various department such as finance, and human resource (Willcocks & Lacity, 2016). The aspect of outsourcing these functionality would enable the business to identify the best resources to employ in the business such as skilled workforce, suppliers which would help them achieve growth rate and be successful in the business (Kim, 2012). The business will be able to outsource various functions such as shareholders, staff who will operate and maintain the system and competent staff which will also connect to the management of the service providers (Jung, 2013). In this perspective it would create a high resources which would increase the delivery of the workflow and consequently high growth rate would be achieved.

Based Prado (2011) has highlighted that outsourcing of the information technology functionality within the business process can be effective in the effective towards the delivery of quality services which lead to growth within the business.

When Aztek implement this project of outsourcing the business process it could help solve some of their current situations which they are encountering such as effective delivery of the services, or even the management of the personnel (Tibble, 2012). Outsourcing information technology especially from the third party vendors could be an effective way for an organization to increase productivity along with profit since they would only pay for what they require most in the business. The services which will be provided by the third party service provider would help decrease on the operational cost of Aztek business which would enable them channel some of their resources towards other sectors within the business which would consequently help increase on the overall productivity (Tibble, 2012). Moreover, the professionals who will be deployed in the management of the system would provide training to the employees of the organization on how their system run, therefore, the cost associated to training of the workers is reduced significantly. Moreover, the service provider would maintain the security which is essential to the systems which the organization has implemented (Willcocks & Lacity, 2016). When Aztek implement this project it will help them in the monitoring of their costs in an improved perspective. Moreover, the usage of the technology in the business has been found to lower on the cost of delivery of the services. Aztek adopting the information technology processes could lower on the labor required in the provision of the services (Willcocks & Lacity, 2016). The information technology can help in better decision making within a business since the organization is able to analyze their trends and be able to identify the patterns that will be instrumental in making of those decision. Outsourcing approaches would be important to most of the processes in the business from the aspect of leveraging on every possibility of gaining enormously in the operations. Therefore, outsourcing would be vital and it is would provide strategic benefit inclined to the operations of Aztek (Lacity & Willcocks, 2000). The organization would be able to outsource on some of their process which were not performing effectively and this would allow them reap long term benefit in the delivery of the services.

Conclusion

The 3^rd party vendor would help maintain the security in the system since in the obligatory agreement this is one of the requirement which they provide. When an organization outsource information functionality they will maintain information technology. The providers could aid in the transformation of the current IT system for the business which uses the valuable assets in order to tighten on their security (Lacity & Willcocks, 2000). The significant aspect which is associated with the information technology functionality particularly in the financial industry is to save workforce long term process of evaluation. The aspect of outsourcing has gone beyond the initial cost cutting in order to improve the parts of their business. The financial organization want to concentrate their efforts on what has made them grow in the first place (Magelssen, Sanchez & Damanpour, 2015). Outsourcing would help to undertake more tactical components in the business to be able to determine the demand in the market, figuring of the sales strategy or even determing the best routine for the services and products which are provided to the consumers.

In the current business world, there are more organization which are starting to look at different processes of outsourcing which is more than the simple accounting organization do to the books. Some of the benefits are outlined as below;

Due to the phases of outsourcing it is not driven by the aspect of cost which is the cost of doing it, but rather the benefits which are associated to outsourcing. When an organization outsource it is able to work at the high level of the efficiency, helps in the elimination of the redundancy as well as lower on the cost which are associated with doing the business.

There is improvement of the services: When Aztek offload some of their tactical responsibilities they will focus better towards the improvement as well as continual innovations of the services they deliver (Lacity & Willcocks, 2000).

There is improved inventory: When a third party vendor manages Aztek functionalities, some of the process such as purchasing, payments, forecasting of the inventory as well as the supply partner activities can speed up, which makes sure that the demand and the inventory can match consistently, which helps to put of the services provided in the hands of the consumers even faster than they used to previously deliver.

There is improvement in the logistics: Through leveraging on the management tools, the third party vendors will be able to automate on the workflow of Aztek as well as the business rules to help get their services to the clients more securely, reliably, cost effectively and much quickly (Lacity & Willcocks, 2000). If this organization partners with the trusted and a knowledgeable third party vendor they will be able to become more efficient and free up some time to enable them to be innovative as well as deliver of the services to their clients.

One of the disadvantage is risk exposing of the confidential data: when an organization outsources some of their information functionalities they will involve in the risk especially if they are exposing their data to the third party.

Another disadvantage is that of synchronizing of the deliverables: In the event that one does not choose the right vendor for outsourcing, there are some common problem which may occur such as stretching of the delivery time frames, as well as sub-standard quality output (Willcocks & Cullen, 2013).

Another issue could be hidden costs: Although outsourcing of the IT functionalities could be cost effective for Aztek Company there may be some hidden costs which are involved especially during the signing of the contract especially if they have been signed across the international boundaries (Magelssen, Sanchez & Damanpour, 2015).

Another issue is the lack of customer focus: this could occur when the outsourced vendor may be providing services to various organization (Shah & Clarke, 2009). In such a situation they may lack the complete focus to the tasks of the organization which they undertake.

Outsourcing has been a strategy that an organization contracts to their major functions to the specialized as well as efficient service providers who can ultimately become a valued asset to the business (Shah  & Clarke, 2009). The development of this innovation has led to huge impacts to the process of the interaction within the financial industry (Magelssen, Sanchez & Damanpour, 2015). Many business within the financial industry including Aztek have encountered many shortcomings when it comes to the innovations and adopting the technologies in different parts of their business. Nonetheless, it is also evident to note that information technology has brought many opportunities especially to the financial industry and it has been helping them to be able to expand on their services.

The security threats usually affect the business in the financial industry such as Aztek by some of the risks and vulnerabilities which the business could encounter. Aztek can improve on their effectiveness of the security of the information technology system through implementation of various mechanism which are aimed to test, monitor and control the risk which could arise from the business (Magelssen, Sanchez & Damanpour, 2015). Outsourcing of the information technology functionality could bring forth many benefits, but it can also cause a lot of risk to such business which is involved in sensitive data of the customer. Some of the threats which the organization may encounter would be:

One is the issue of the data confidentiality: Data confidentiality is an important aspect to any business and it regards to the protection of the confidential or sensitive data from access of individuals who are not authorized (Gobble, 2013). Aztek organization could face this threat when they fail to protect their information or even when they loss the data. Moreover, through outsourcing the information of the business is exposed to third party especially when they incorporate on their system to the business (Schwalbe, 2014). There may be rogue employees who would want to sell this information to the competitors which leads to the external attacks.

There is the issue of the system integrity: This relates to the reliability, accuracy as well as the completeness of the data that the system in the organization are processing, transmitting and storing in their servers (Gobble, 2013). The information should be accurate so that when the customers view it they would satisfied but when there is outsourcing of the IT functionality there is likelihood that it may be misrepresented which become a threat to the business.

Another issue is the availability of the system: individuals who access the system which be in view that the system is of high standards and it maintains confidence to them whereby there is an online framework to which they are able to rate on its functionality (Prado, 2011). In the event that the organization is not sure of the eminent quality it thrives from it is could be a security threat since it may be prone to attacks.

Another aspect is the protection of the customer through ensuring that the clients are protected well especially by monitoring of the sensitive information of the customers. Aztek organization may face a threat especially when the data of the clients has been exposed through hacking or even an attack to the system (Oshri, Henfridsson & Kotlarsky, 2017). This could cause prominent issue especially when these individuals sues the company for exposing their information; the image of the company could also be destroyed.

The financial organization some time they may be subjected to the dangers of breach in the security in their system which could cost them a lot especially if the sensitive data of the client has been exposed (Rivard & Aubert, 2015). In the case of Aztek Corporation they will implement system for the management of these vulnerabilities and other risks that would pose the danger to the business (Oshri, Henfridsson & Kotlarsky, 2017). However, when there is the issue of information risk it could have devastating effect to the organization. The possible exploitation could be as a result of the cybercriminals, use of the information technologies which are outdated and insufficient use of the information technology resources.

There are numerous risk which Aztek Corporation may encounter from the implementation of the project of outsourcing of the information technology functionalities (Oshri, Henfridsson & Kotlarsky, 2017). To be able to have a process which is effective the organization needs to follow the following risk procedure for the management;

The assessment of the risk that is likely be encountered by Aztek in the anticipation of the project is given on the sale of one to eight (Schiesser, 2010). One to two is the lowest level of the risk, three to five the medium level and six and eight the highest risks.  The risk of the organization are highlighted as below;

Probability of risk occurrence	Very high
Effect	Very high
Vulnerabilities	·       There could be insufficient standards to implement the outsourcing IT functionality. ·       Poor role of divisions and adoption ·       Difficulties to measure set obligation for set obligations ·       The ownership of resources become hard to decide.
Consequences	·       Loss of customer trust. ·       There may be loss of the customer data. ·       Poor delivery of service.
Risk	High

The analysis of this threat issue is examined as follows.

issue of the system integrity	medium
Impact	medium
Vulnerabilities	·       The system may lack the confidence of the public
Consequences	·       There may be lack of trust from the clients. ·       There may be possible loss of the data of the staff. ·       There could be lower levels of service delivery.
Risk	High

Probability of risk occurrence	Medium
Impact	Very high
Vulnerabilities	The system may not provide confidence to the customers and employee.
Consequences	There could be a possible loss of the data.
Risk	Medium

This issues has been analyzed as follows;

Probability of risk occurring	Low
Impact	Very high
Vulnerabilities	·       Organization may not change their reputation if it is ruined. ·       There could be possible loss of data if the information of the clients has been compromised.
	·       The customer losses data in case their data is breached. ·       There could be bad image of the organization. ·       There could be poor level of service delivery.
Risk	High

The security issues which are associated with the outsourcing of the information technology functionalities are as follows;

One of the issue is that the third party to which the services which are outsourced with have an access to the data for Aztek: When Aztek outsources on their Information functionality, they will need to provide access to their data to the service provider (Oshri, Henfridsson & Kotlarsky, 2017). This could pose a security risk since the provider may not know the information which is sensitive in nature.

Data destruction as well as retention: This is one of the major concern to which the financial institution faces when they outsource some of their functionalities from the third party vendor (Oshri, Henfridsson & Kotlarsky, 2017). Some of the third party in their agreement to provide the service it may not incorporate the aspect of what will occur in the event get lost, or on the retention issue.

Another issue is the sharing of the resources of the computers to the third party: Aztek should grant permission to the service provider to be able to access their information. These individuals gain entry to the system of the organization to be able to implement on this new system (Pfleeger, 2003). This could pose a security concern if there are rogue employees within the organization or if the information is not handled well.

Based on the views in regards to the risks which have been accessed in the research, it is possible to highlight that if Aztek has wide knowledge of the possible risk which may impact on the organization in relation to data security, and the migration of the vital information technology services as well as applications, this organization should be able to fully implement this project (Pfleeger, 2003). The service provider of the IT functionality it intends to outsource should offer a good framework model of the services. This will help in the reduction of the risk are associated to the breach of data or the loss.

Conclusion

Aztek they would likely encounter efficient as well as reliable management solutions when they implement this project to their organization of outsourcing key IT functionalities. The business has a high chance when it comes to achieving their objectives as well as expounding on their services. This research report has been able to analyze information in regards to the IT functionality of the financial service industry. Further, it has been able to highlights on the current practices which are implemented in Aztek and the impact it would bring to the business. The last part of the report has highlighted on the threats, vulnerabilities as well as the consequences assessment which has been done on the effect of implementing of the project. There is issue of data security which has also been raised and how the organization intends to implement their mechanisms to curb any breach of the information. It is therefore, evident, from the research that information technology could play a major part in the businesses particularly in the financial industry as well as other sectors. However, there are risks which could impact the business and they need to be safeguarded at all cost.

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