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The Limits of Outsourcing

The fundamental types of security risks haven't changed since the days of the Medicis.

Despite technological innovation, the fundamental types of security risks haven't changed since the days of the Medicis, notes Marshall Millsap, senior vice president and global network manager at J.P. Morgan Chase.

"What has changed, perhaps, is the order of magnitude in a global world of risks, because we're much more interactive with each other, both as institutions and individuals," he said. "An Italian in the city of Florence was not worried about what was going on in Paris unless he had lent money to the king of France."

Millsap's job title is misleading, in that he doesn't configure routers. Instead, his group manages outsourcing and vendor management for the company's treasury management and payments businesses. "It's not the IT function of network management-it's buying services from other organizations," he said.

Although a bank can seek outside expertise and guidance, bankers themselves are responsible for securing their informational and monetary assets. "You can bring in experts to help you build a system or to administer various parts of it, but your regulators are probably not going to take you off the hook for the way that they define security," said Millsap. "More importantly, your clients think they're paying you for that already-that's why they come to a bank."

Still, outsourcing plays a critical role in the business of banking.

"Overseas bankers are embarrassed to say they bought something from a technology company," said Millsap. "I buy things from other banks that I compete with because they have done a better job with it than I have."

But there are definite limits to what can be outsourced. "From a regulatory point of view, whether it's the letter of the law or the spirit of the regulation, security is the issue of the banker," said Millsap.

"Without question."

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