Here's why Singapore financial firms are ditching offshore operations

A study by Robert Half revealed that financial services in Singapore are pulling their offshore operations back to the city-state as they battle with costs and skills shortage.

sbi offshore
Picture for representation. Reuters

Rising costs and worsening skills in offshore regions are increasingly pushing Singapore financial firms to bring their offshored operations back to the city-state.

According to a study by Robert Half, around 44 percent of financial services' Chief Financial Officers (CFOs) in Singapore have increased their level of on-shoring in the past two years, compared to 10 percent who have decreased their onshoring activities. Additionally, 50 percent have increased their level of nearshoring, or the transferring of operations to a nearby country.

When asked for the reason behind the increased level of onshoring, 66 percent of CFOs cited rising costs and 59 percent pointed out the skills shortage in offshore regions.

There are also concerns about the quality of their offshore services, with 48 percent saying that there are service complaints and 43 percent identify the lack of efficiency as one of the key reasons for transferring offshore business operations back to Singapore.

Robert Half Singapore Managing Director Matthieu Imbert-Bouchard said Singapore's financial services sector operates within a highly competitive global market with companies being under increasing pressure to maximise cost-effectiveness.

He stressed that efforts by these firms are only aggravated by a growing regional skills shortage. In fact, more than four in 10 CFOs would consider shutting down their offshore operations if specialised skills are available locally.

"With the lack of skills in the offshore regions driving Singaporean financial services organisations to bring back activities to the city-state, this could potentially boost local employment within the financial services sector, resulting in an improvement in Singapore's competitive position within the region," he explained.

For those who have put back their operations onshore, around 47 percent say it resulted in improved productivity whilst 44 percent said there is certainly an enhancement in service quality. They also cited greater customer responsiveness and increase in cost efficiency as amongst the benefits of returning their operations onshore.

Imbert-Bouchard furthered, "The lack of local talent in key functional areas within financial services needs to be addressed as it can potentially lead to more operations finding their way (back) to Singapore, with positive knock-on effects for employers and the economy."