Governance of financial services outsourcing: Managing misconduct and third party risks

Joseph Mc Cahery; Alexander de Roode

Governance of financial services outsourcing: Managing misconduct and third party risks

Tilburg Law and Economic Center (TILEC)

Research output: Chapter in Book/Report/Conference proceeding › Chapter › Scientific › peer-review

Abstract

With financial institutions increasingly outsourcing their activities, they face a record number of fraud and misconduct cases arising from third-party services. We survey financial institutions to better understand which governance mechanisms may improve the monitoring and management of third-party relationships. Overall, our results suggest that there are gaps in traditional governance arrangements. We find that financial institutions rely mainly on internal monitoring to detect fraud and that whistleblowing plays an important role in mitigating misconduct risks. Finally, we report evidence that vendor dependency and product complexity play a pronounced role in delaying termination of agreements.

Original language	English
Title of host publication	Corruption and fraud in financial markets
Subtitle of host publication	Malpractice, misconduct and manipulation
Editors	Carol Alexander, Douglas Cumming
Publisher	Wiley-Blackwell/John Wiley & Sons
Chapter	15
Pages	399-422
Number of pages	24
ISBN (Print)	9781119421771
Publication status	Published - 7 May 2020

Keywords

Outsourcing
financial institutions
governance
fraud and misconduct
D22, D23, G20, G34

Connecting Organizations
Bekker, S. (Researcher), Bomer, A. (Researcher), Borghouts, I. (Researcher), De Pietro, C. (Researcher), Dusarduijn, S. (Researcher), Elsweier, F. (Researcher), Essers, P. (Researcher), Garcia Anton, R. (Researcher), Gribnau, H. (Researcher), Gubbels, N. (Researcher), Hoogeveen, M. (Researcher), Houwerzijl, M. (Researcher), Kaufmann, W. (Researcher), Kemmeren, E. (Researcher), Lafarre, A. (Principal Investigator), Lejour, A. (Researcher), Li, J. (Researcher), Loth, M. (Researcher), Mc Cahery, J. (Researcher), Montebovi, S. (Researcher), Peters, C. (Researcher), Rombouts, B. (Researcher), Russo, R. (Researcher), Staats, G. (Researcher), Starink, B. (Researcher), Steegmans, M. (Researcher), Stevens, S. (Researcher), Stevens, T. (Researcher), Sumner, I. (Researcher), Tjong Tjin Tai, E. (Researcher), Tzankova, I. (Researcher), Verbruggen, P. (Researcher), Vermeulen, E. (Researcher), Westerhout, E. (Researcher), Weterings, W. (Researcher), Wibier, R. (Researcher), Xu, D. (Researcher), Zegveld, C. (Researcher), Zekić, N. (Researcher), van Gulijk, S. (Researcher), van Hout, D. (Researcher), van Hulten, M. (Researcher), van Kempen, T. (Researcher), van Kesteren, H. (Researcher), van Vijfeijken, I. (Researcher), van der Elst, C. (Researcher), van der Sangen, G. (Researcher), Öner, C. (Researcher), Kryla-Cudna, K. (Researcher), Mak, V. (Researcher), Smit, D. (Researcher), Op Heij, D. (Researcher), Onţanu, E. A. (Researcher), Salah, O. (Researcher), Wijntjens, L. (Researcher), van Norden, G.-J. (Researcher), Vereijken-van den Bosch, S. (Researcher), Fernandez de Aranguiz Chueca, A. (Researcher), Diamant, Y. (Researcher), Geiregat, S. (Researcher), van der Burgt, B. (Researcher), Hofman, A. (Researcher) & Groeneveld-Tijssens, N. (Researcher)
1/01/19 → 31/12/23
Project: Research project

Cite this

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title = "Governance of financial services outsourcing: Managing misconduct and third party risks",

abstract = "With financial institutions increasingly outsourcing their activities, they face a record number of fraud and misconduct cases arising from third-party services. We survey financial institutions to better understand which governance mechanisms may improve the monitoring and management of third-party relationships. Overall, our results suggest that there are gaps in traditional governance arrangements. We find that financial institutions rely mainly on internal monitoring to detect fraud and that whistleblowing plays an important role in mitigating misconduct risks. Finally, we report evidence that vendor dependency and product complexity play a pronounced role in delaying termination of agreements.",

keywords = "Outsourcing, financial institutions, governance, fraud and misconduct, D22, D23, G20, G34",

author = "{Mc Cahery}, Joseph and {de Roode}, Alexander",

year = "2020",

month = may,

day = "7",

language = "English",

isbn = "9781119421771",

pages = "399--422",

editor = "Alexander, {Carol } and Cumming, {Douglas }",

booktitle = "Corruption and fraud in financial markets",

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Governance of financial services outsourcing: Managing misconduct and third party risks. / Mc Cahery, Joseph; de Roode, Alexander.
Corruption and fraud in financial markets: Malpractice, misconduct and manipulation. ed. / Carol Alexander; Douglas Cumming. Wiley-Blackwell/John Wiley & Sons, 2020. p. 399-422.

Research output: Chapter in Book/Report/Conference proceeding › Chapter › Scientific › peer-review

TY - CHAP

T1 - Governance of financial services outsourcing

T2 - Managing misconduct and third party risks

AU - Mc Cahery, Joseph

AU - de Roode, Alexander

PY - 2020/5/7

Y1 - 2020/5/7

N2 - With financial institutions increasingly outsourcing their activities, they face a record number of fraud and misconduct cases arising from third-party services. We survey financial institutions to better understand which governance mechanisms may improve the monitoring and management of third-party relationships. Overall, our results suggest that there are gaps in traditional governance arrangements. We find that financial institutions rely mainly on internal monitoring to detect fraud and that whistleblowing plays an important role in mitigating misconduct risks. Finally, we report evidence that vendor dependency and product complexity play a pronounced role in delaying termination of agreements.

AB - With financial institutions increasingly outsourcing their activities, they face a record number of fraud and misconduct cases arising from third-party services. We survey financial institutions to better understand which governance mechanisms may improve the monitoring and management of third-party relationships. Overall, our results suggest that there are gaps in traditional governance arrangements. We find that financial institutions rely mainly on internal monitoring to detect fraud and that whistleblowing plays an important role in mitigating misconduct risks. Finally, we report evidence that vendor dependency and product complexity play a pronounced role in delaying termination of agreements.

KW - Outsourcing

KW - financial institutions

KW - governance

KW - fraud and misconduct

KW - D22, D23, G20, G34

M3 - Chapter

SN - 9781119421771

SP - 399

EP - 422

BT - Corruption and fraud in financial markets

A2 - Alexander, Carol

A2 - Cumming, Douglas

PB - Wiley-Blackwell/John Wiley & Sons

ER -

Governance of financial services outsourcing: Managing misconduct and third party risks

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Keywords

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Cite this