How tax managed services can accelerate banks’ transformation programs

Abank’s support functions have many similarities, but each is unique in its own important way. Tax, finance, risk and compliance all demand constant rigor, high levels of accuracy, and a winning combination of talent and technology.

At the same time, banks have to fight to keep pace with increasingly complex regulation and governance requirements, coupled with the acceleration of technology and a highly fluid workforce. Banks’ investment – both in time and money – in acquiring advanced technology and talent to run their support functions efficiently is relentless.

This continuous effort to keep up has led to support functions sitting firmly in the crosshairs of cost management. As a result, banking leaders who are seeking new ways to reduce the cost pressure of their support functions are increasingly turning to external service providers to help carry the load.

Managed services can lift the requirements of non-core but critical activities, such as tax and finance, and is an alternative way for banks to increase operational resilience while curbing costs. Crucially, it gives banks the freedom to grow and perform.

There are two main stages to any managed services operation: transition and transformation. Transition requires a large amount of trust between the client and the managed service provider because it is the stage during which the client gives the provider access to their financial data. According to John Thomopoulos, EY Global Banking & Capital Markets Tax Leader, “If a bank is going to turn around and hand you their most sensitive information, they have to trust you. So, the fundamentals of client services are essential.”

In the case of the EY organization and the bank, the transition phase first involved an assessment of the bank’s existing state of operations – how its tax and finance function operated in-house, and how core elements of the function could feasibly transition across to EY teams as part of a managed service.

Once this stage was complete, the EY teams started to work on transferring the bank’s financial data to EY’s secure, technology-enabled environment. This involved cleaning the data, restructuring it and presenting it in a format whereby the bank could use it many times for a variety of different purposes.

The benefit of leveraging EY technology

The transition to a managed services approaches also opened up the ability to drive ongoing and multidimensional cost savings.

Risk dispersal and data protection

Another benefit of managed services lies in how they can improve the risk profile of a bank’s tax and finance function. For banks, the cost of risk failure can be severe – from a reputational hit with customers to financial penalties from a regulator, or even being shut down entirely, depending on the severity of the issue and the legislation of the affected market.

A huge part of this risk profile concerns banks’ data. Although facilitating secure remote access is one way to curb risk exposure, being able to manipulate large data volumes to produce relevant output presents an altogether different type of risk. With many bank employees having to work from home during the COVID-19 pandemic, banks confronted challenges giving people access to the right technology, while maintaining the security of customers’ data when accessed remotely, and bandwidth issues.

One of the most important processes the EY team had in place before its engagement with the bank was a technology-enabled approach to managed services. In the world of COVID-19, this not only provides the bank with greater efficiencies and risk management benefits but enables the creation of a resilient managed services environment to withstand the unanticipated challenges of a sudden move to distance working.

If a bank is going to turn around and hand you their most sensitive information, they have to trust you. So, the fundamentals of client services are essential.

Coupled with the bank’s data risk concerns was the worry of concentration risk – meaning too many people in one place. However, based on previous crisis events – particularly in the aftermath of the 11 September attacks where much of New York City physically shut down – the EY organization had already acted to create service delivery teams located across different geographies. “My thinking never went to a worldwide pandemic, but after 9/11 we built a robust business continuity process program so that people could operate in different cities globally,” says Thomopoulos.

This meant the EY organization could quickly offer the bank real-time information about the stress-testing of EY services’ teams in different locations. For example, if issues arise in the India office, the EY organization can rapidly offer the bank the option of dispersing work between teams based in Indiana, South Carolina, Texas and New York.

As a result, EY managed services approach has demonstrated its value via its advanced technology and business continuity readiness, both of which reinforce and enhance the bank’s own continuity processes during this crisis.

Building a more agile, adaptive, resilient bank

The versatility of the EY team’s approach to managed services means that with the transition phase complete, the team and the bank can enter the transformation phase of the work in complete alignment and with greatly enhanced agility.

Overall, COVID-19 is likely to serve as a major tipping point for banks to increasingly adopt managed services – the main reasons being access to talent and technology. Managed services can serve as an important extension of banks’ business continuity plan – and its benefits are not going unnoticed by the banks, their customers, and regulators alike. Managed services have become increasingly significant in enabling companies to maintain their competitive advantage and transform.

In a crisis – as the world found with COVID-19 – maintaining the stability of the banking system is in the interest of all stakeholders. As the pandemic hit, banks were keen to ensure strong business as usual practices, albeit in a virtual environment. Stabilizing their support functions and assessing how their risks have changed because of COVID-19 were urgent priorities for banks’ leaders.

Managed services providers that have the right secure technology platforms, with multi-access pipes pre-built to receive data from different sources from a bank’s wider business ecosystem, can be vital cost-saving and continuity-enabling channels for these banks. But more than just outsourcing and cost-saving, it’s the most effective and value-added way of running an organization, and all it entails.

And, crucially, at the heart of any managed services relationship is a deep sense of trust and collaboration – especially due to the highly sensitive financial data transactions that banks must track for tax reporting and regulation purposes.

In a tough marketplace and increasingly competitive sector, banks can use managed services to build offerings that are truly unique.

My thinking never went to a worldwide pandemic, but after 9/11 we built a robust business continuity process program so that people could operate in different cities globally.

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How tax managed services can accelerate banks’ transformation programs

How managed services can benefit tax and finance functions

Create adaptive services to facilitate business continuity by design

The benefit of leveraging EY technology

Risk dispersal and data protection

If a bank is going to turn around and hand you their most sensitive information, they have to trust you. So, the fundamentals of client services are essential.

From building business continuity to enhancing agility

Building a more agile, adaptive, resilient bank

My thinking never went to a worldwide pandemic, but after 9/11 we built a robust business continuity process program so that people could operate in different cities globally.