Question 1 In an effort to reduce costs and focus on core services, banks are repeatedly outsourcing their final financial services work to third parties, who are sometimes located outside the country, to regularly carry out operations that would generally be carried out by the bank itself. Any financial institution that outsources its activities bears certain risks, which must be mitigated by a regulatory body such as the central bank. The central bank is the supreme monetary institution, which has been specially endowed with formal authority to exercise control over the entire banking system of the country. Regulators can mitigate these risks by taking steps to: • Create broad and clear outsourcing policies; • Introduce effective outsourcing policies. risk management programs;• Impose contingency planning on the outsourcing company;• Arrange appropriate outsourcing contracts;• Review the financial and infrastructure resources of the service provider. Regulators can reduce risks by including the assessment of outsourcing in their assessment of individual banks to oversee systemic risk and by monitoring concentration risk among service providers. Rapidly evolving IT advancements, as well as increasing dependence on external service providers, risk causing systemic problems if not properly controlled by a union of market and regulatory authorities. positioned to recognize threats of failure. They can prioritize them in an agenda mapping possible weaknesses and outlining the sequence of cause and effect within the system. In addition, the central bank should ask financial institutions to inform them of any plans aimed at outsourcing. After reviewing the situation...... middle of document ......w.in/it-service-outsourcing-by-banks-risks-and-benefits/ [Accessed March 5, 2014]Service Outsourcing (2005) http://iaisweb.org/__temp/Outsourcing_in_financial_services_report__February_2005.pdf [Accessed March 6, 2014]Guidance on risk management. [Online] Available at: http://www.occ.gov/news-issuances/bulletins/2013/bulletin-2013-29.html [Accessed March 7, 2014] Financial Services Guidance Note Outsourcing (2005) http:/ /www. .fsc.gi/download/adobe/GuidanceNote-Outsourcing.pdf [Accessed March 1, 2014] Official website of the Reserve Bank of India (2006) http://www.rbi.org.in/commonman/english/scripts/ Notification. aspx?Id=40 [Accessed March 7, 2014]Agent Banking: Risk Management, Mitigation and Supervision (2011)http://www.cgap.org/sites/default/files/Focus-Note-Bank-Agents-Risk - Management-Mitigation-and-Supervision-Dec-2011.pdf [Accessed February 27 2014]