On 25 February 2021, the Central Bank launched a public consultation " CP 138 on Cross-Industry Guidance on Outsourcing" and issued draft Cross-Industry Guidance on Outsourcing (the "Guidance"). The stated aim of the Guidance is to assist firms in developing their outsourcing risk management frameworks so as to effectively, identify, monitor and manage their outsourcing risks.
Elaine Long, senior associate: "The Guidance is a culmination of the significant body of work undertaken by the Central Bank in recent years in relation to outsourcing, including its cross sector survey of regulated firms, a discussion paper, an industry conference and ongoing supervisory engagements. More broadly, the Guidance complements the strategic themes of "Strengthening Resilience" and "Strengthening Consumer Protection", as set out in the Central Bank's Strategic Plan 2019 – 2021.
Certain categories of firms will already be familiar with the prescriptive guidelines issued by the European Supervisory Authorities ("ESAs"). The Guidance is intended to support and compliment any existing sectoral legislation, regulations and guidelines on outsourcing. Importantly, "where such existing measures are less prescriptive or silent on certain matters, the Central Bank expects regulated firms to refer to the supervisory expectations set out in the Guidance". In addition, the Guidance is proposed to apply to all regulated firms (albeit in a proportionate manner) thereby increasing the supervisory focus by the Central Bank in this area to firms that may not previously have been within the ambit of the ESA guidelines. The Central Bank acknowledges however, that the manner in which the Guidance may be adopted may differ based on the nature, scale and complexity of a firm's business and the extent to which a firm relies on outsourcing of critical or important functions as part of their business model.
The Guidance explores key themes, including the recurring challenges faced by firms in relation to outsourcing and the Central Bank's expectations as to how such challenges are managed and mitigated. While firms will undoubtedly need to digest and, in due course, meet the detailed obligations set out in the proposed Guidance, a centralised and comprehensive description of the Central Bank's minimum expectations will likely be a welcome resource for regulated firms in navigating and meeting such requirements.
The Central Bank proposes to publish the final Guidance later in 2021 after the conclusion of the consultation process (26 July 2021), following which the Central Bank expects "the board and senior management of firms to review the Guidance and adopt appropriate measures to strengthen and improve their outsourcing frameworks and their effective management of outsourcing risk". Firms will be expected to demonstrate that they have considered the supervisory expectations set out in the Guidance in this regard."
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