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SHAPING THE FUTURE OF FINANCIAL SERVICES OPERATIONS: OFFSHORING, NEARSHORING & RIGHTSHORING

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SHAPING THE FUTURE OF FINANCIAL SERVICES OPERATIONS: OFFSHORING, NEARSHORING & RIGHTSHORING

Tim Smolcic, Programme Manager at Brickendon, looks at why financial services companies are moving closer to home

Brickendon-LogoOffshoring was once seen as the future for financial services (FS) companies around the world. It was meant to be part of an unrivalled age of cost saving, fiscal and logistical efficiencies and advantageous market conditions. This apparently ideal business model initially provided companies across the FS sector with a competitive, efficient and economical system to relocate an array of day-to-day, primarily functional, roles to countries with lower operating costs and cheaper manpower. In reality the consequences of offshoring have proven more complex.

Companies which moved some or all of their operations overseas subsequently discovered that the relative lack of multi-skilled staff available could hinder the efficient technical and logistical solutions to which they were accustomed. They also realised that levels of education and the range of specialist training available are often not interchangeable with the standard in the country where the business is headquartered. This resulted in more management layers to carry out the same processes, while accompanying costs and time-management issues also increased – levelling the playing field compared to resources in high-cost locations. Consequently, increasing numbers of financial services companies reviewing their current practices are discovering that due to the additional hidden or unforeseen costs, offshoring can be several times more expensive than originally anticipated.[1]

Amid rising public discontent as a result of more services and operations being offshored – due to the accompanying loss of jobs and employment – more companies are becoming increasingly concerned by how their own offshoring practices are perceived by customers and employees alike.[2] Rising wages overseas and volatile foreign economies, as well as events like the vote to leave the EU and the rise of pro-nationalist politicians across Europe and the United States have also influenced companies reconsidering their operating processes.

New business models are emerging in response to these pressures and shaping the wider financial services operations mix. These new players such as rightshoring and nearshoring are providing businesses with the opportunity to return closer to home and relocate parts of their operations while also keeping costs at a competitive minimum and streamlining business processes.

Nearshoring

Tim Smolcic

Tim Smolcic

Partly in response to the backlash against offshoring, nearshoring has acted as a useful counterpoint to several of the main disadvantages inherent within offshoring. With this model, businesses are able to move their operations to a location closer to home that also provides a comparatively highly skilled-base, infrastructure and resources – all at a lower cost than the country of origin. Locations such as these typically operate in similar time-zones and have less cultural differences – allowing business practices to retain their original efficiencies and competitiveness. For example, companies located in the UK might choose to nearshore to other European countries due to them sharing similar laws and trading routes, such as “passporting rights”, while remaining close to London – one of the world’s leading financial hubs.

Another important point to consider is that the accompanying costs of transferring operations from a perceived low-cost to a high-cost region are often lower than originally anticipated. This is a result of the international presence of many companies who may already have an established presence in these areas. These pre-existing and highly valuable resources, assets and facilities can smooth the transition and simplify the processes involved with relocation. Another advantage is that these more efficient operational processes also save time and reduce overheads as well as cutting down on unnecessary costs. Moreover, the most significant benefits tend to come from the ability to source highly-skilled workforces more quickly than are generally otherwise unavailable or difficult to acquire in low-cost markets. This results in teams that are smaller, require less management structures, work faster and more efficiently while delivering workloads rapidly. This leads to lower operating costs for a comparable output as opposed to a bloated and inefficient low-cost team. Some organisations have discovered that when compared to low-cost locations, nearshore locations have been able to use a quarter of the staff whilst delivering results more quickly and efficiently.

Rightshoring – and the future

With growing numbers of companies across the financial services sector worldwide looking to balance costs and quality, new financial hubs such as Tel Aviv and Warsaw have emerged and are vying to attract the attention of potential businesses. Offering high-quality services with low overheads and operational costs, these mid-cost regions have positioned themselves as highly competitive and appealing areas for companies to consider outsourcing some or all of their business operations. Allocating the time and resources for strategic analysis and planning reduces costs, maintains quality and simplifies day-to-day business operations as opposed to offshoring thousands of miles from where a company is based. Rightshoring also strengthens managerial control and helps protect against overseas vulnerabilities – an increasingly important issue as the protection of intellectual property continues to be a growing concern within the FS sector. Rapidly improving technology means that new FS hotspots such as these are increasingly well-connected to global financial and communications systems in addition to regional resources and infrastructure.

While offshoring may have lost some of its appeal across the FS sector it is by no means finished. It remains the ideal option for specific scenarios where skills and resources in low-cost markets are readily available, such as testing. Rightshoring is also increasingly viewed as the optimum combination of local and foreign allocations of workforces and business operations. Domestic, financial and political factors – ranging from new regulatory requirements to growing competition from disruptive financial services providers – have motivated companies to reassess their outsourcing procedures and consider strategies that can help them deliver better quality more quickly, whilst maintaining a lower cost base than operating fully onshore. As the financial services sector continues to evolve at such an exciting rate, the trends shaping offshoring, nearshoring and rightshoring are by no means over – but a key issue to keep your eye on.

[1] Brickendon, September 2016

[2]The Guardian, July 2016

Finance

SH Capital Ltd launches in Dubai to support SMEs with global banking services

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SH Capital Ltd launches in Dubai to support SMEs with global banking services 1

Fintech provider to reconnect businesses with international banking services, digital treasury management solutions, risk management and cash investment products

A new digital treasury services management provider SH Capital Ltd (SHC), launches in Dubai today with a plan to empower small and medium sized enterprises (SMEs & MMEs) by offering world class global banking services, asset management, FX hedging solutions, investment products and services.

SH Capital is a subsidiary of parent company Stanhope Financial Group, which launched with $3.5m funding in November last year.  In December, the group also announced the launch of its EU headquarters in Lithuania after obtaining its Electronic Money Institution licence.

The independent fintech firm, which has received its in-principle approval Cat 3A regulatory licensing from the DFSA, Dubai, is set to begin trading as of end of Q2’21, with a mission to help companies meet their financial goals during the Covid-19 recovery.

SHC will act as an intermediary for clients, helping them to access leading and global tier one cash investment products. The Stanhope team of leading industry experts will also advise on commercial paper, money market funds, futures, options, ETFs & FX hedging solutions.  Additionally, SHC has already partnered with a number of global counterparties, exchanges and e-trading venues to provide liquidity in the equity, FX, fixed income and commodity markets for all clients.

In spite of recent market volatility due to Covid-19, SHC are also committed to providing bespoke financial strategies for companies as matched principle, designed to meet their risk tolerance and position them ahead of the curve for both short and long-term financial goals.

To do this, SHC leverages the latest RegTech and blockchain technology, which helps to significantly reduce CBR risk and service friction, whilst maintaining a fast, secure and transparent service.  More specifically, AML, KYC, trade monitoring and a distributed ledger technology are just some of the technology utilised for an efficient and safe execution of service.

Speaking to Global Banking and Finance Review, Khalid Talukder, Managing Director, SH Capital Ltd, said: “For ambitious businesses within the GCC, getting multi-product access and global reach of investment instruments and solutions will be a critical priority for 2021 and beyond.

“Key to SH Capital’s offering is that we have the ability to aggregate high tier one investment solutions in a single venue, delivered digitally through our platform. This gives clients a greater choice and reach over the instruments that they can invest in, as well as our ability to help create a bespoke portfolio on a client-by-client basis through our holistic approach to client service. “

“Dubai is quickly being recognised as a global hub of fintech and innovation, being home to some of the fastest growing, most exciting firms on the planet.  With postponed Dubai Expo launching in the Autumn of 2021, we are perfectly placed to support these business to maximise this global showcasing opportunity.

Many of these businesses struggle to gain access to efficient and high quality digital asset management and investment products globally to support their treasury activities.  We aim to provide a fully digital service offering via our platform allowing easy access to various cash asset management products, services and investment products that they need in order to thrive in an increasingly competitive global world.

SH Capital Ltd will change all that, reconnecting these fast-growing firms mid-market corporates which are the backbone of GCC commerce with the products offered by Tier 1 financial institutions, as well as offering treasury consultancy to take them to the next level.

With over 70 years combined experience in our team of financial professionals, shared with quantitative-driven data insight, regulatory technology and blockchain, we are confident we can provide a consistent treasury management service, free from delays, security issues and unfair charging, to all firms in need of assistance during this difficult Covid period and beyond.”

Kevin von Neuschatz, Group CEO, Stanhope Financial Group added, “We’re excited to have received our operating licence and formally launch SH Capital Ltd in Dubai. Our on-the-ground team of experts will begin trading immediately, providing ambitious businesses across the region with tier one banking and payments services to enable rapid growth during an incredibly challenging time.

This is the first of many expansion plans for the Stanhope Financial Group, with similar launches in Europe and other key regions in the first part of 2021.”

 

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Daily Mail publisher posts 15% drop in quarterly revenue

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Daily Mail publisher posts 15% drop in quarterly revenue 2

LONDON (Reuters) – The publisher of Britain’s Daily Mail newspaper said that group revenue fell 15% in the three months to the end of December, dragged down by falls in print advertising revenues at its papers and by cancellations in its events business.

Daily Mail and General Trust said that group quarterly revenue came in at 304 million pounds ($416 million), down 15% on an underlying basis, but excluding the impact of cancelled events it was down 5%.

At its newspapers, print advertising revenues fell 38%, compared to an 8% rise in digital advertising. The group said that the impact of the pandemic meant it was difficult to provide short-term forecasts.

($1 = 0.7301 pounds)

(Reporting by Sarah Young; editing by Michael Holden)

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Finance

Dollar slides vs. most currencies on optimism about Biden administration

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Dollar slides vs. most currencies on optimism about Biden administration 3

By Gertrude Chavez-Dreyfuss and Saqib Iqbal Ahmed

NEW YORK (Reuters) – The dollar fell against most currencies on Wednesday, as risk appetite held up on optimism about a massive stimulus package under the new Joe Biden administration that will likely bolster a U.S. economic recovery.

The greenback slid against the yen as well as currencies tied to commodity prices such as the Australian, Canadian, New Zealand dollars, and the Norwegian crown. The U.S. dollar dropped to a three-year low versus its Canadian counterpart and sterling, while hitting a two-week trough against the yen.

The S&P 500 climbed to a new all-time peak, while U.S. crude futures gained as the risk rally carried on.

Biden was sworn in as the 46th president of the United States on Wednesday, vowing to end the “uncivil war” in a deeply divided country reeling from a battered economy and a raging coronavirus pandemic that has killed more than 400,000 Americans.

The new government is expected to push through Congress a nearly $2 trillion U.S. fiscal stimulus plan.

“Once you are no longer uncertain about something and it materializes, the overall optimism grows and gives way to the global recovery narrative,” said Juan Perez, senior FX strategist and trader at Tempus Inc. in Washington.

“The election and the issues after — all of them played a dramatic role, but now it’s over. Joe Biden is president and stimulus hopes are, like some markets, at a record high,” he added.

In afternoon trading, the dollar fell 0.4% against the yen to 103.54, sliding to a two-week low earlier in the session to 103.45.

The U.S. dollar tumbled to a three-year low versus the Canadian currency at C$1.2607, after the Bank of Canada on Wednesday opted not to cut interest rates. The greenback was last down 0.7% at C$1.2642.

The Aussie dollar rallied 0.6% to US$0.7745, while the New Zealand currency also gained 0.6% to US$0.7167.

Sterling rose to a three-year high versus the dollar of $1.3720, but surrendered some of those gains to trade up just 0.1% at $1.3643.

A combination of heightened risk appetite in global markets and UK-specific optimism lifted the pound on Wednesday.

The dollar index, meanwhile, was up 0.1% at 90.483. Since the beginning of the year, the index has posted a modest 0.5% gain.

Futures positioning data still shows that investors are overwhelmingly short dollars as they figure that budget and current account deficits will weigh on the greenback.

The euro fell 0.2% against the dollar to $1.2106.

European countries are struggling to contain the contagion of the coronavirus amid worries that a new variant could lead to more stringent lockdowns and more economic pain.

Investors are also fretting about the slower pace of the rollout of vaccines relative to the United States and Britain, which may hobble economic recovery in the euro zone.

(Reporting by Saqib Iqbal Ahmed and Gertrude Chavez-Dreyfuss; Editing by Mark Heinrich and Sonya Hepinstall)

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