A survey of the Switzerland and Liechtenstein banking industry says the trend to outsource certain functions is starting to reverse, and that private banks are falling behind their financial peers in setting out financial programmes.

Private banks in Switzerland and Liechtenstein risk falling behind other financial institutions in the Alpine states when it comes to setting out financial programmes, according to a survey by EY that also notes a swing in the pendulum against the practice of business outsourcing.

EY aka Ernst & Young surveyed senior financial professionals in 25 banks in the two jurisdictions. Among the findings is that of financial officers improving their ability to support business operations (business partnering) - in total, 84 per cent of respondents ranked business partnering among their top three priorities. 

Overall, global and foreign banks are best prepared or most advanced in their preparations to address their finance priorities and already have corresponding programs in the pipeline or fit-for-purpose solutions in place, the survey found. 

Private banks, on the other hand, risk falling behind, with only 50 per cent of surveyed CFOs saying they had an adequate growth programme in place, compared with 67 per cent of global and foreign banks. Cantonal and regional banks again require a differentiated perspective in this context due to their limited growth potential, although they also feel well prepared at 67 per cent.

All survey respondents in the private banking sector as well as global and foreign banks, without exception, included business partnering in their top three priorities. In addition, close to 60 per cent of private banks said the finance function supporting growth was among the top three priorities. The finance functions of global and foreign banks are likewise beginning to shift their attention to growth, with 40 per cent listing this among their top three priorities. Owing to the limited growth potential of cantonal and regional banks, this topic is not high on the agenda of their CFOs. 

Cantonal and regional bank CFOs are also less concerned than their peers about improving their ability to support the business, with only 50 per cent including business partnering among their top three priorities, EY said.

“In a bid to enable agile service delivery that supports growth, leading organizations are taking a dual approach by splitting the finance function’s service catalog into two distinct sets of tasks,”  Daniel Haudenschild, partner and finance advisory leader at EY Financial Services Switzerland, said.

“Transactional services will tend to be offshored, standardized and automated. Decision support, in contrast, requires a range of advanced capabilities that are advisory in nature, onsite and typically have to be customized to each specific business unit of the organization. Such capabilities include predictive analytics, customer and market analysis or pricing and deal support,” he said.

Present and future
When asked to compare the current maturity of their finance organisation against the future level that will be required to meet their objectives up to 2020, the surveyed banks said by far the biggest gap was in the field of technology, with big deficits also reported in data (both aspects are listed by 56 per cent of those surveyed under their top three challenges, while 24 per cent named technology as the greatest challenge).

“The finance organisation has to become a forward-looking function that is relevant for the business. Leading organizations in the market typically focus on building up two main finance capabilities: strategic planning and forecasting and predictive analytics,” Elizabeth Whitfield, Partner at EY Switzerland, said.

Offshoring losing appeal
The survey results indicate the pendulum is swinging away from outsourcing and towards using offshore captives (entities within the organisation but outside high-cost countries). According to the figures, offshoring using captives is projected to increase by three per cent by 2020, while outsourcing is projected to decrease by one per cent in the same period.

Th bulk of outsourced activities centre around transactional tasks such as tax compliance, transaction processing and controls, the survey said. 

The survey was conducted in June and July 2015. Of the banks surveyed, 40 per cent were global and foreign banks, 32 per cent were cantonal and regional banks and 28 per cent were private banks.