
TE Organisation Model – Offshore Model
This edition of our trade execution guide focuses on the offshore organisation model, an increasingly popular structure in modern trade execution organisations. By relocating certain functions to teams in other countries, the offshore model provides organisations with opportunities to leverage cost efficiencies, consolidate processing activities, and access specialised skills. This guide examines the model's defining characteristics, its potential benefits and challenges, and the factors organisations must consider when adopting this approach.
The Offshore Model: Key Characteristics
The offshore model centres on the transfer of specific functional tasks and processes to teams based in different countries. This approach is often motivated by the pursuit of cost savings through salary arbitrage, enhanced operational efficiencies, or access to specialised talent pools. Unlike the decentralised model, which distributes decision-making across regions, offshoring typically retains strategic oversight at a central level while delegating the execution to offshore teams. The model allows organisations to focus internal resources on core functions while outsourcing or relocating repetitive or specialised tasks.
The Advantages of Offshoring
The offshore model can deliver significant benefits, particularly for organisations seeking operational efficiency. Cost savings are among the most compelling advantages, as organisations can reduce operational expenses through consolidation of TE activities and moving the process execution to regions with lower costs. Additionally, many offshore destinations provide access to skilled labour markets, particularly in trade execution and associated processes, ensuring high-quality service delivery.
Another advantage lies in the model's ability to facilitate 24/7 operations. By utilising teams across different time zones, organisations can accelerate turn around times, improve responsiveness, and enhance overall operational continuity.
Challenges in an Offshore Model
Despite its benefits, the offshore model presents a unique set of challenges. Geographical distance and time zone disparities often create communication barriers that can delay decision-making and hinder collaboration. Quality control is another concern; ensuring consistent standards across geographically dispersed teams requires robust governance and oversight, particularly when cultural or regulatory differences are at play.
Employee engagement also poses a challenge. Offshore teams may feel isolated from the core business, potentially reducing their alignment with organisational goals and affecting morale. Organisations must address these issues proactively to realise the full benefits of the offshore model.
Evaluating the Offshore Approach
Adopting an offshore structure requires a thorough evaluation of organisational priorities and the suitability of specific functional processes for offshoring. Cost sensitivity is a critical factor, as the potential for salary arbitrage and operational savings often drives the decision to offshore. Scalability is another consideration; the offshore model enables organisations to adjust operations flexibly in response to seasonal demands or project-based needs without incurring significant capital investment.
However, not all functions are suitable for offshoring. Processes requiring close customer interaction or intensive collaboration may suffer when managed offshore. Organisations must carefully assess the strategic fit of each function before transitioning to an offshore model.
Mitigating Risks in an Offshore Structure
The risks associated with offshoring can be effectively managed through strategic planning and oversight. Establishing structured communication channels and conducting regular check-ins with offshore teams are critical to maintaining alignment with core business objectives. Comprehensive training and integration efforts can foster a sense of inclusion among offshore teams, enhancing their engagement and understanding of organisational goals. Performance monitoring, supported by key performance indicators (KPIs), allows organisations to trackand evaluate the effectiveness of offshore operations, ensuring that standards are consistently met.
Industry Adoption
Offshoring has become the preferred model for global and large regional trade houses, particularly for non-core functions and repeatable process activities in trade execution and shipping operations. These organisations leverage their geographic reach and operational scale to create offshore service centres that deliver efficiency and cost advantages.
For small and medium-sized enterprises (SMEs), the benefits of offshoring may seem less accessible due to limited scale. However, outsourcing to trusted providers can offer a viable alternative, enabling SMEs to achieve similar efficiencies and access specialised expertise. This topic will be explored further in the next edition of the newsletter.
Conclusion
The offshore model offers organisations an effective means of reducing costs, accessing specialised talent, and improving operational efficiency. While it can introduce challenges such as communication and quality control issues, these can be mitigated through structured governance, clear communication practices, and robust quality assurance mechanisms. With the right approach, the offshore model becomes a powerful strategy for organisations seeking to enhance their trade execution and shipping operations.
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