Prudential risk management of IT sourcing strategies: a case study of an Australian bank

Banks are under market pressure to reduce costs and employ different IT sourcing strategies to reduce IT costs: outsourcing, outsourcing-offshoring, and multi-sourcing. In Australia, banks are highly regulated under the Australian Prudential Regulatory Authority (APRA) which manages implementation of the Australian banking act. We selected a large domestic bank in Australia (WBC) for our pilot study. This paper aims to demonstrate the complexity and risk of the IT multi-sourcing delivery environment within WBC. We outline an approach to study risk management of IT multi-sourcing that could be applied across the Australian banking industry. After investigating the decision theories that underpin the selection of IT delivery models used within WBC, this study analyses public documents to reveal the trends and effects of outsourcing contracts over the past five years, and compares the alignment of WBC's risk framework with that of APRA to recommend proactive risk management framework to mitigate multi-sourcing risks.