The outsourcing industry could benefit from the layoffs

The outsourcing industry could benefit from the layoffs
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According to a report by CNBC, huge layoffs are expected to happen at Wall Street for the first time since 2019. This phenomenon will be pushed by downturned markets, inflation, and expected weak performance post-Q3. 

And Amy Lynch, founder and president of outsourced compliance firm FrontLine Compliance, said that this won’t stop with just a few banks.

Enter outsourcing. Born out of the 1989 recession, outsourcing is the practice of hiring firms outside of the company to perform tasks such as back-office operations — compliance, accounting, IT — and even leadership roles such as chief investment officers (CIO) and chief financial officers (CFO).  

Basically born out of crisis, as described by Lynch, outsourcing grew into tremendous fame during the global financial crisis in 2008. The reason? Outsourcing is good for cost-cutting. 

Most employees do not realize how expensive it is to keep them on staff. In fact, Lynch explained that retaining an employee costs the company an additional 35% of that employee’s paycheck.  

Outsourcing can help firms save 35% on costs without consequence on their operations.

For firms with in-house compliance and IT departments, outsourcing those functions can be cheaper than retaining staff. 

In the case of investment staff, however, hiring OCIOs may cost allocators more money than if they stick with their original investment team, according to Brad Alford, founder of OCIO consulting search firm Alpha Capital Management.

“Doing the outsourced route, at least OCIOs, may not necessarily be the cheapest,” Alford told II. “It’s just that [allocators] are dealing with turnover among their employees and this is the most efficient [solution].” 

Amanda Tepper, founder and CEO of management consulting boutique Chestnut Advisory Group, added that the most important driver of recruiting outsourced CIOs and CFOs is that some business functions are “non-core and/or require specialized expertise that would be prohibitively expensive for the business to keep-in house.”

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About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.