PERSON OF THE WEEK: Arjun Raman is associate vice president of business process services at Wipro Ltd., the parent company for lending technology provider Wipro Gallagher Solutions and due diligence firm Opus Capital Market Consultants. MortgageOrb recently interviewed Raman to learn more about recent trends in the business process outsourcing (BPO) and what lenders and servicers should look for when selecting a BPO partner.
Q: Why have lenders and servicers been increasingly leaning on BPO to meet their business needs?
Raman: Due to regulatory and financial pressures, lenders and servicers have really focused on ensuring business sustainability. Now that the industry is nearing the final home stretch on a number of major compliance initiatives, lenders and servicers are setting their sights on growth and technology advancement, yet few have the internal infrastructure in place to fully execute on new business strategy. Many will need to rapidly redesign value chains to increase efficiency without increasing dependence on already constrained resources. Working with a business process outsourcing team, lenders and servicers can get access to sophisticated tools and technologies that can help them improve their processes and meet compliance, while at the same time gaining financial flexibility.
In working with BPO partners, lenders and servicers can bring scalability to IT and operations by shifting from a fixed cost model to a per-loan cost model. In a per-loan cost model, operating expenses vary with the expansion and contraction of the business, and since loan volumes are historically unpredictable, a variable pricing model is a practical choice for lenders and servicers looking to minimize IT and resource investment risk, remain nimble during economic change, and gain the financial flexibility to prioritize business investments.
Lenders and servicers also recognize the opportunity to leverage their BPO partner for the value they bring through the use of modern tools and technology such as big data and analytics. No one wants to guess on big business decisions. However, many lenders and servicers have been too bogged down with regulatory compliance to create focused data and analytics programs. A sophisticated BPO partner will have made significant investments in big data and analytics and will be positioned to provide lenders and servicers with insights and intelligence that yield better business decisions.
Finally, some of the most desirable features of modern BPO providers pertain to the ability to drive process optimization. A lender or servicer can benefit from BPO that adheres to best practices, but it stands to gain far more if its BPO partner takes the service level up a notch and strives to deliver process excellence. For example, through the application of automation tools, voice and data analytics, Six Sigma and LEAN initiatives, a BPO provider can help the lender identify bottlenecks and make ongoing process improvement recommendations.Â
Q: What are the top most critical factors that must be carefully considered before relying on just any BPO partner?
Raman: As with partnering with any third-party provider, the first factor that lenders and servicers must consider when relying on a BPO provider is the firm's reputation and whether it is viewed as employing strong business ethics. Having a trusted partner with good core values translates into fair and sound business practices. If the vendor partner does not perform responsibly, this will directly and negatively impact the lender or servicer's business. Therefore, lenders and servicers should seek out public message boards to uncover any complaints about other parties working with the BPO partner and ensure the BPO partner has a formal procedure toward managing any complaints to provide timely and meaningful resolution.
Another key factor in evaluating BPO partners is their financial stability and scale. Focusing on a firm's long-term health in the marketplace will guarantee longevity of the relationship and ensure that the provider has the reputation and financial wherewithal to absorb any risk, no matter what the economic conditions are at that point in time.
Lenders must also consider a company's innovative DNA. BPO partners add value to the client's business by delivering top line growth with global best practices, IP tools, accelerators, platforms and LEAN Six Sigma.
Finally, a strong delivery team that is very competent, responds quickly and helps have a strong working chemistry is very essential to have a successful partnership and guarantee customer satisfaction.Â
Q: A lot of lenders and servicers are trying to minimize the number of vendors they have to manage. The perception is, the more vendors under management, the greater the risk. How would you respond to those claims?
Raman: This decision is best taken keeping size and scale in mind. Larger companies should use a dual- or multi-vendor strategy to manage risk. Smaller businesses should look at consolidation with strong business redundancy plans.
Now that lenders are responsible for third-party compliance, it is even more important to carefully select business partners. While the risks associated with third-party vendor management have certainly added to overall institutional risk, there is big opportunity for lenders to elevate expectations and increase accountability with their business partners.
One of the ways a lender or servicer can approach this challenge is by seeking out qualified providers that have an end-to-end offering and that somehow offer ‘skin in the game’ with various aspects of their service.
Demanding greater levels of reporting and transparency from a BPO provider is also critical. If a provider requires excessive handholding, then it will set the lender or servicer back and increase risk. However, if a BPO partner proactively provides reports and updates per the governance agreement and communication plan established, it should serve to simplify and streamline vendor relationship management.
Q: How do lenders and servicers know they are choosing the right BPO partner? What are some of the reasons lenders decide against working with BPO partners, and why is it so important for them to reconsider that decision?
Raman: A strong due diligence process is essential to evaluating the quality of your BPO provider candidate. First-time outsourcers should always start with pilot programs to evaluate the vendor before making any long-term contract commitments. This decision should not be taken lightly; it is vital that you properly vet and research the company.
In the current mortgage environment there are a few key qualities that mortgage participants should seek out in their business process partners. Some of the more technical features include compliance with relevant industry regulations, SAFE licensing, tailored location strategies, experienced mortgage professionals, sophisticated technology enablers and experience in process re-engineering and automation.
However, a good partner must also be willing to go the extra mile to align with the lender and servicer and become a true extension of their organization. Too often, we hear lenders and servicers emerge from a negative BPO experience due to the provider's lack of appreciation for unique processes and approaches.
Lenders and servicers, therefore, should ensure that a BPO provider has a strong knowledge acquisition and knowledge transfer program in place, to remove organizational inconsistencies. Good BPO providers are in the business to help augment the business' strategy and boost profitability. The right BPO provider will offer goal-oriented thinking and ensure their lender partners continuously improve their processes, exceed customer satisfaction and provide innovative ideas to further enhance their presence in the marketplace.
