With the persistent sanitary uncertainties (Pandemics, its variants, and sub-variants) and the current inflationary pressures, it can be a difficult balancing act for businesses to operate efficiently / profitably whilst containing costs.

This is now amplified with the recently observed phenomenon of the Great Resignation observed since the beginning of last year, which is posing a challenge for any type of businesses, be it start-ups, SMEs, or larger organisations. This blog, whist focusing on Management Companies [“MCs”] operating in the Global Business Sector, are also applicable to any organisation.

For MCs, the challenge is intensified as they have to maintain international standards for their global clients whilst remaining competitive. MCs are constantly being faced with additional obligations due to onerous legislations and regulations, which in most cases cannot be recharged to clients. Indications are that these pressures will go on increasing with the everchanging legislations, pressures from the OECD, the effects of COVID-19 on the economy worldwide, etc.

Many of the activities of MCs includes non-core areas, which is a distraction for top management. Their time and resources would best be utilised for more strategic business issues, thus contributing towards more efficiency, effectiveness, excellency, and profitability of their organisation.

The starting point for any MC in deciding whether to outsource or not is to assess whether non-strategic activities are still economically viable. This can be done by conducting a cost v/s benefit analysis on the activity concerned.

MCs may consider outsourcing some of their non-core activities, where the margin is either negligible or loss making. One of the areas concerned is the preparation of accounts for Authorised Companies / GBC 2 / IBCs. Historically, these types of clients are costs sensitive, hence the low level of fees being charged.

So, by outsourcing them and focusing on more profitable / lucrative activities, the profitability of an MC can be partly improved. In so doing, an MC can save on extra resources and time spent on them and focus rather on its core income generating activities such as accounting of GBC 1, CIS / Funds, Compliance, etc.

The benefits for outsourcing are numerous for an MC:

1. Cost savings:

• There will be a control on operating costs as fewer employees are needed to perform these administrative tasks, thus maintaining a low headcount.
• It will eliminate the cost of hardware and software investment and its subsequent maintenance and will reduce spending on technology upgrades, software licences, etc.

2. Other indirect savings:

• Opportunity cost will arise from redeploying resources and investments to other more profitable areas.
• It will reduce the risk of fluctuating employee turnover and the need for recruitment and retraining, thus ensuring a stable operational environment.
• There will be potential reduction in rental costs, as fewer rental space will be required.

3. Change in company focus

• It will reduce the time spent on administrative task and allow for the refocus on more strategic planning initiatives and more profitable activities.
• It will reduce financial risks involved in non-compliance and having to pay penalties for late filing from the Regulators and potential lawsuits from clients.
• It will also reduce reputational risk due to non-performance /not able to deliver within the deadlines.

With the outsourcing of its non-core activities, an MC will enjoy some form of benefits and convenience whilst significantly improving its bottom line.

Common concerns in outsourcing arrangements are usually on non- compete clause and data protection and these should be captured in an outsourcing agreement. What is also important is to associate yourself with the right outsourcing partner that has the required knowledge, qualification, competence, and experience of the industry.

At SilverFin we take these issues seriously and can guarantee that contacts will be through the MCs and that discussions on the accounts and data will not be shared to any outside parties.

SilverFin is well poised to partner with you in your outsourcing needs. We can work in synergy to expand and grow together, as we are not competitors but rather an accounting & business consulting firm. As a partner, our goal is to help you achieve tangible benefits in the areas of cost savings as well as increased service level performances.

The present blog is focused on accounting of GBC 2 / Authorised company, where the activity is presumably being performed at a loss or negligible margin. However, we will be happy to extend our accounting services to other GBC or even to the administration of your GBC 2 / Authorised companies / IBCs, if they are no longer economically viable.

Interested in outsourcing some of your non-core activities? SilverFin is your answer. Let’s have a meeting / Zoom call to discuss on the above and then have a subsequent meeting to discuss on the implementation phase.

Sandeep Fakun, FCCA, TEP

Mobile – 52507261

Date:24^th February 2022