Firms lack confidence in service providers’ compliance, Ocorian reports
12 October 2023 UK
Image: Thapana_Studio/stock.adobe.com
Ocorian has published a guide for firms considering switching outsourcing providers, following research revealing that 51 per cent of companies are not confident that their service providers are keeping up with compliance and reporting requirements.
The publication, ‘A complete guide to switching your corporate services provider’, outlines when, why and how to switch providers.
The study found that more than a quarter of companies using their-party providers expect to change their current service provider situation within the next 18 months. Of this figure, 13 per cent state that they will bring operations back in house, 11 per cent will switch to a different provider and 2 per cent plan to bring in additional support.
Just over two thirds of participants stated that they review their suppliers annuals, with the remainder doing so every two or three years. Dissatisfaction with current providers stems from poor data and reporting quality for 64 per cent of those polled. More than half cite service levels as the primary issue, and 48 per cent report technology problems as the driver for change.
Despite this, Ocorian found that companies are hesitant to change providers as a result of the considerable due diligence that comes with onboarding a new supplier. An additional 42 per cent of participants added that they are hesitant to transfer providers due to the reaction from the incumbent.
Entity management obligations emerged as a high-level concern for companies. Close to a third of senior legal representatives predict a ‘dramatic increase’ at their organisations over the next three years, and a further 62 per cent anticipate a ‘slight increase’. These predictions are based on recent performance, with 60 per cent of those polled reporting increased obligations over the past three years.
Outsourcing for entity management is on the rise, according to Ocorian’s report. More than half of those polled expect ‘significant increases’ in secretarial services outsourcing over the next three years, and almost half anticipate ‘sizeable increases’ in accounting, tax and reporting services outsourcing.
This is due to recruitment and compliance cost issues, according to more than half of participants, while companies’ expansions across jurisdictions are a ‘major influence’ on outsourcing increases for a third of those polled.
When choosing a corporate services provider, more than 40 per cent rely on law firms or accountants for specialist recommendations. A further 25 per cent rely on word-of-mouth recommendations, and 10 per cent find providers through trade fairs. The final 22 per cent reported that they find providers via Google.
Entities not meeting local compliance regulations is a significant concern for firms, with 69 per cent concerned by the impact this could have on investors and a further 59 per cent raising fines and penalties as a risk. Reputational damage is also a possibility in this case; more than half of those polled fear a loss of credibility within their organisation, and almost a quarter mentioned negative media attention as a concern.
As a result, ensuring that corporate service providers are up-to-date with new legislation is a major concern during the selection process. Almost two thirds of firms added that they would like more visibility and control over their global estates.
Participants in the study were senior legal executives working for FTSE 250 and FTSE 350 firms and private companies with revenues between £10 million and £1 billion. The majority of these were UK-based firms, however Swiss, Swedish, Dutsch, German, French, Italian and Danish companies were also incorporated.
Commenting on the findings, Jason Gerlis, global head of corporate services at Ocorian, says: “It’s important for many of our clients that our team not only understands the local regulatory needs, but can translate those in a way that makes sense for head office. Corporates need to be able to rely on outsourced providers who make life easy with regular communication and with work completed on time.
“If companies cannot rely on partners to be up-to-date with compliance and reporting regulations there are risks to their business and it makes sense to switch. It may seem easier to stick with a current provider, but the cost of not switching when you have concerns could cause bigger issues for your business down the line.”
The publication, ‘A complete guide to switching your corporate services provider’, outlines when, why and how to switch providers.
The study found that more than a quarter of companies using their-party providers expect to change their current service provider situation within the next 18 months. Of this figure, 13 per cent state that they will bring operations back in house, 11 per cent will switch to a different provider and 2 per cent plan to bring in additional support.
Just over two thirds of participants stated that they review their suppliers annuals, with the remainder doing so every two or three years. Dissatisfaction with current providers stems from poor data and reporting quality for 64 per cent of those polled. More than half cite service levels as the primary issue, and 48 per cent report technology problems as the driver for change.
Despite this, Ocorian found that companies are hesitant to change providers as a result of the considerable due diligence that comes with onboarding a new supplier. An additional 42 per cent of participants added that they are hesitant to transfer providers due to the reaction from the incumbent.
Entity management obligations emerged as a high-level concern for companies. Close to a third of senior legal representatives predict a ‘dramatic increase’ at their organisations over the next three years, and a further 62 per cent anticipate a ‘slight increase’. These predictions are based on recent performance, with 60 per cent of those polled reporting increased obligations over the past three years.
Outsourcing for entity management is on the rise, according to Ocorian’s report. More than half of those polled expect ‘significant increases’ in secretarial services outsourcing over the next three years, and almost half anticipate ‘sizeable increases’ in accounting, tax and reporting services outsourcing.
This is due to recruitment and compliance cost issues, according to more than half of participants, while companies’ expansions across jurisdictions are a ‘major influence’ on outsourcing increases for a third of those polled.
When choosing a corporate services provider, more than 40 per cent rely on law firms or accountants for specialist recommendations. A further 25 per cent rely on word-of-mouth recommendations, and 10 per cent find providers through trade fairs. The final 22 per cent reported that they find providers via Google.
Entities not meeting local compliance regulations is a significant concern for firms, with 69 per cent concerned by the impact this could have on investors and a further 59 per cent raising fines and penalties as a risk. Reputational damage is also a possibility in this case; more than half of those polled fear a loss of credibility within their organisation, and almost a quarter mentioned negative media attention as a concern.
As a result, ensuring that corporate service providers are up-to-date with new legislation is a major concern during the selection process. Almost two thirds of firms added that they would like more visibility and control over their global estates.
Participants in the study were senior legal executives working for FTSE 250 and FTSE 350 firms and private companies with revenues between £10 million and £1 billion. The majority of these were UK-based firms, however Swiss, Swedish, Dutsch, German, French, Italian and Danish companies were also incorporated.
Commenting on the findings, Jason Gerlis, global head of corporate services at Ocorian, says: “It’s important for many of our clients that our team not only understands the local regulatory needs, but can translate those in a way that makes sense for head office. Corporates need to be able to rely on outsourced providers who make life easy with regular communication and with work completed on time.
“If companies cannot rely on partners to be up-to-date with compliance and reporting regulations there are risks to their business and it makes sense to switch. It may seem easier to stick with a current provider, but the cost of not switching when you have concerns could cause bigger issues for your business down the line.”
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