Luxembourg’s financial sector continues to rely heavily on outsourcing services. A survey, conducted by PWC among 342 top executives and operational heads in the financial sector, found that a remarkable 90 percent of them engage in outsourcing activities.
The survey underscores that outsourcing is a significant component of Luxembourg’s financial landscape, with a vast majority of respondents relying on some form of it.
Financial institutions, irrespective of their size or sector, are adopting various outsourcing strategies, with full outsourcing becoming more common than partial outsourcing, the survey concluded.
“New technologies – particularly artificial intelligence and its offshoots – appear poised to redefine virtually every sector and industry, in addition to the very way we work or handle matters as crucial as cybersecurity and data privacy,” Cécile Liégeois (photo), clients & markets leader at PwC Luxembourg, said in a press release.
Need to review operational models
“In this new context, financial institutions have no choice but to scrutinise their operational models, enhance their efficiency, and remain agile, all while navigating the intricate and perpetually evolving regulatory landscape.”
Luxembourg has long depended on outsourcing services, a trend that has benefited the Big Four consultancies, including PWC. The financial sector often prefers outsourcing over direct adoption of new technologies due to the risks of rapid obsolescence. This trend is exemplified by Deloitte’s recent acquisition of Luxembourg fintech firm Alto Advisory.
The Big Four firms collectively employ a significant portion of Luxembourg’s financial workforce, with nearly 10,000 employees in a sector of approximately 60,000 people.
Dora will create even more work
PWC anticipates an increased demand for its services to support financial firms in transitioning to the upcoming EU-wide Digital Operational Resilience Act, or Dora, set to take effect in January 2025. Dora is expected to bring substantial changes to outsourcing activities within the EU and affect non-EU companies servicing EU entities. Financial actors are urged to prepare for this regulatory shift.
Liégeois emphasised the varied understanding of this upcoming change among survey respondents, but notes the financial sector’s forward-thinking approach, suggesting a growing seriousness in addressing Dora as its enforcement date nears.
“Dora will change outsourcing across the financial sector and regulated entities will need to quickly adapt,” said PWC’s Liégeois. “The degree to which survey respondents understand this imminent paradigm shift is varied, but the forward-thinking nature of the financial sector suggests that the seriousness with which Dora is handled will increase as its enforcement date approaches.”