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Considerations when negotiating agreements

Contractual negotiations usually focus on technical, commercial, and value-for-money considerations.  In addition, the FCA states in SYSC 13.9 that, when negotiating with a service provider, a firm should have regard to:

  1. Reporting or notification requirements it may wish to impose on the service provider.
  2. Whether sufficient access will be available to its internal auditors, external auditors, or actuaries and to the FCA (including access to premises and dealing in an open and cooperative way)
  3. Information ownership rights, confidentiality agreements and Chinese walls to protect client and other information (including arrangements at the termination of the contract).
  4. The adequacy of any guarantees and indemnities.
  5. The extent to which the service provider must comply with the firm’s policies and procedures (covering, for example, information security).
  6. The extent to which a service provider will provide business continuity for outsourced operations, and whether exclusive access to its resources is agreed.
  7. The need for continued availability of software following difficulty at a third party supplier.
  8. The processes for making changes to the outsourcing arrangement (for example, changes in processing volumes, activities and other contractual terms) and the conditions under which the firm or service provider can choose to change or terminate the outsourcing arrangement, such as where there is:

    • A change of ownership or control (including insolvency or receivership) of the service provider or firm; or
    • Significant change in the business operations (including sub-contracting) of the service provider or firm; or
    • Inadequate provision of services that may lead to the firm being unable to meet its regulatory obligations

Considerations during contract negotiations

Have you read our responses behind other key questions?  You can view them by clicking on the links to the pages below:

The need for outsourcing agreements

Structure and contents of the agreements

Failure to meet requirements – case study

When do firms need to meet these requirements by?