Among other things, the Central Bank expects: boards to have appropriate oversight and awareness of outsourcing arrangements and the associated risks; operational oversight to be clearly designated to relevant individuals, functions and/or committees; firms to make sure they have the appropriate skills and knowledge to effectively oversee and understand arrangements, and their associated risks, from inception to conclusion; and firms to prepare for the worst – considering what the loss of service providers would look like, identify the potential triggers for this and finally, what actions would the company take to minimise consumer detriment and interruption of service in such circumstances.
While it was difficult for some financial institutions to pursue active risk-taking until they completed their repayment of public funds, I believe that Japanese financial institutions as a whole generally appear to have been maintaining a cautious risk-taking stance based on the experience I have just mentioned.