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The middle office is a term that is applied to business functions that focus on monitoring and providing information about the outcome of efforts conducted by the front office. The data that is received and structured by the middle office is then passed on to the back office, which in turn completes the transactions necessary to keep the business active. Often, this section of the business is part of the operations division of the firm, and focuses its attention on such important tasks as quality control, risk management, and loss prevention.
In many situations, the middle office functions as a support mechanism for the front office. One example of this type of relationship can be seen in the sales efforts of the business. As the sales force wins customers for the business, this office handles the tasks necessary to handle the fulfillment process, allowing the customer to receive the goods or services ordered. In the event that the office, as part of the operations area of the business, is unable to deliver on the promises made by the front office, the customer is usually lost. For this reason, close communication between those who sell the products and those who engage in product delivery is extremely important.
While the concept of a middle office can apply to any type of business, the term is routinely used in businesses that focus on providing financial services. Here, this section of the company operation often focuses on managing the flow of transactions within the company, as well as maintaining detailed and accurate records regarding those transactions. This makes it easier to maintain an accurate accounting of the profit flows of the business, and plays a major role in the settlement of accounts.
The middle office often has the responsibility of providing the back office with the data necessary to complete the transaction process with the customer. Once a customer order has been successfully prepared, the data is transmitted to the back office, where delivery can be scheduled and the invoicing process can take place. Without the middle office to supply essential details, the back office would be unable to manage these functions, and the company would never generate cash flow.
In just about any type of business, this office functions as the perfect link from the open market functions of the company, and the successful completion of the interaction with the customer. By helping to manage the flow of information, managing the use of resources in the preparation of the product delivery, and passing on essential data for the completion of transactions, the middle office provides the framework that provides the company with an efficient and logical operating structure. When some factor inhibits the ability of the office to manage these important functions, every other area of the business finds it much harder to efficiently operate.
It seems like a middle office would also increase the risk of error and duplication within a business, as well.
As you alluded to, Certlerant, the more departments that handle customer and order information, the more likely it is for that information to get lost along the way.
In the computer age, it is hard to imagine why all of the necessary information cannot be recorded by the front office. As a result, that information would get to the back office people faster and with less confusion.
Just like a middle man in seller-to-consumer situations, efficient companies should be able to eliminate middle office jobs to reduce costs to the business and the customer.
A company would have a difficult task explaining to an efficiency expert why the front officer can't take orders and gather the needed information from customers instead of a middle office.
Perhaps the front office would need to hire a few more employees to keep up with some new responsibilities, but this still would most likely be cheaper than maintaining an entire middle office department, so to speak.
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