What Are the Different Types of Middle Office Services?

Geri Terzo

In the financial services industry, the different types of professional roles and functions are divided into various segments. Middle office services include risk management activities, where the adherence with financial regulation is secured. Professionals in risk management roles are tasked with ensuring a firm is taking on appropriate risk in trading, financing, and investment activities to protect the assets of the firm. Middle office services extend to considering the end user, who could be a customer, client, or investor, and protecting their experience. A firm may support middle office services internally, or outsource these functions.

Businessman with a briefcase
Businessman with a briefcase

Middle office services include safeguarding information, activity, and communication for customers even if the professionals in these roles do not typically deal with clients directly. Risk management personnel are somewhat behind the scenes with customers but have an extremely high-profile role within financial organizations. The technology standards that are enforced and the methods used to protect private information are all part of middle office services.

Investment into middle office services becomes especially heightened when there is new regulation emerging in the financial services arena. This is because companies must invest in making sure that they are in compliance with the legal and regulatory standards established. The experts that are hired for risk management roles to support new industry rules might assess the types of systems that need to be implemented in order for a business to be in compliance. Compliance professionals also continue to make sure that standards are kept throughout an organization on a daily basis.

Financial firms that have trading divisions where professionals buy and sell stocks, bonds, and other financial securities throughout the day for clients or with a firm's own money are constantly assessing risk in the markets. Middle office services include risk management activities that monitor and evaluate the type of risks that investment professionals are taking. Risk management professionals assess whether any trading positions are exposing a firm or clients to excessive risk in an attempt to protect these parties from severe financial loss.

At times, an organization may choose to outsource middle office services. A challenge in doing this could be tied to potential delayed response times from third party firms when market participants need to make immediate decisions. The specific tasks could entail evaluating the risk that a financial management firm might have in doing business or extending financing to various regions around the world.

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