Ireland: Central Bank Of Ireland Publishes Findings Of Review Into Outsourcing Arrangements

Last Updated: 28 November 2018
Article by Cillian Bredin

1. Background

Earlier this week, the Central Bank published its Outsourcing-Findings and Issues for Discussion (the "Paper").

The Paper is divided into two parts. The first part details its findings of the cross-sectoral review that it has conducted on outsourcing arrangements. The second part of the Paper requires regulated firms to consider a number of key risks and evolving trends relating to outsourcing and asks for feedback from industry to specific questions relating to these risks.

2. What is outsourcing?

The Central Bank describes outsourcing as "a written agreement of any kind between a regulated financial service provider and a service provider (whether regulated or unregulated) whereby the service provider performs an activity which would otherwise be performed by the regulated firm itself." Therefore activities which are not regulated by the Central Bank also fall within the scope of outsourcing. Furthermore, in the Paper the Central Bank draws no distinction between outsourcing to intragroup entities and outsourcing to third party service providers.

It is worth noting at the outset that the Central Bank has explained that the term "outsourcing" is used in place of other terms which may be used in specific sectors such as "delegation". Therefore those sectors which currently impose rules relating to delegation instead of outsourcing will also fall within the scope of the Paper.

3. Next steps for regulated firms

Review of existing outsourcing risk management framework

In light of the "disappointing" findings from its review, the Central Bank has made clear that it expects all regulated firms to analyse the Paper and "take appropriate steps to address issues relevant to their outsourcing practices". It has also stated that Central Bank supervisors "will seek evidence of updates to risk management frameworks to ensure that the paper was considered and an examination of outsourcing was conducted".

What follows is a brief overview of some of the key areas which regulated firms should focus on when conducting a review of the arrangements in place with outsourced service providers ("OSP"). These can be categorised under the headings of governance, risk management and business continuity.


  1. Board Awareness: Is the Board and senior management fully aware of the scale of existing and proposed outsourcing arrangements and associated risks?
  2. Outsourcing Policy: Does the firm have a documented and comprehensive outsourcing policy in place which complies with relevant legislation and guidance?
  3. Oversight Structure: Is there an appropriate oversight structure relating to outsourcing in place, with clearly established lines of responsibility?
  4. Contractual Arrangements with OSPs: Have contractual arrangements, supported by service level agreements ("SLA") against which performance can be measured, been put in place with all OSP and are there appropriate governance arrangements in place around the development, signoff and maintenance of such SLA?

Risk Management

  1. Risk Assessments: Does the firm conduct appropriate initial outsourcing risk assessments and review and update such risk assessments on a periodic basis to ensure its risk management framework appropriately captures outsourcing risks?
  2. Due Diligence: Does the firm carry out appropriate due diligence in respect of both third-party and intra-group OSP?
  3. Categorisation of Activities: Where relevant, have the outsourced activities been categorised as critical or important in order to ensure that these activities are appropriately overseen, monitored and reported on? Has the regulated firm reviewed all arrangements to determine whether or not they constitute an outsourcing arrangement?
  4. Skills and Knowledge of Staff: Does the staff of the regulated firm have appropriate skills and knowledge to effectively monitor and manage outsourced activities appropriately and to either substitute the OSP or bring the outsourced function in-house in an orderly manner?
  5. Monitoring of Performance of OSP: Is the performance of the OSP monitored so that issues can be identified, escalated and resolved as necessary?

Business Continuity

  1. BCM Arrangements of Regulated Firm: Does the BCM arrangements of the regulated firm appropriately address the fact that certain services have been outsourced?
  2. BCM Testing: When testing its own BCM arrangements, does the firm include OSP in the testing of any activities or processes that involve or rely on the relevant OSP?
  3. Testing of OSP BCM arrangements: Does the firm test and review the BCM arrangements of the OSP on a periodic basis?
  4. Exit Strategies: Do the outsourcing contracts incorporate an exit strategy which allows for a "timely and orderly transfer of activities with minimum service disruption"?

Once a regulated firm has conducted a review of its outsourcing arrangements, it should ensure that it can demonstrate to the Central Bank that appropriate action has been taken to address any deficiencies it has identified in its outsourcing risk management framework.

Consideration of key risks and evolving trends

In the second part of the Paper, the Central Bank asks regulated firms to consider and action a range of issues dealing with (i) sensitive data risk, (ii) concentration risk, (iii) offshoring risk; (iv) chain outsourcing and (v) substitutability. Therefore the review of the operational risk management framework should incorporate a consideration of each of these issues.

Separately, the Central Bank has asked industry to provide feedback on a number of questions it has included on each of these topics by 18 January 2019, explaining that this feedback will inform the Central Bank's engagement in domestic, EU and international fora on outsourcing and its ongoing consideration of its policy position relating to outsourcing. It also intends to hold an industry event in 2019 at which these issues will be discussed further.

4. Conclusion

Regulated firms should now take the time to review their outsourcing arrangements to determine whether they meet or fall short of the Central Bank's expectations in the areas of governance, risk management and business continuity management and where necessary, ensure that appropriate action is taken to address any identified deficiencies.

This review should also consider and action the specific issues raised by the Central Bank in Part B of the Paper relating to sensitive data risk, concentration risk, offshoring risk, chain outsourcing and substitutability risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions