Adopt Risk Intelligent Approach To Outsourcing, Offshoring - Deloitte

With the global IT and BPO market approaching US$600 billion and still growing, investments in outsourcing and offshoring initiatives have never been higher, or more critical to organizational success. In an effort to help organisations address significant risks and derive maximum value out of their outsourcing and offshoring strategy, Deloitte has published a new whitepaper titled “The Risk Intelligent Approach to Outsourcing and Offshoring.” As corporations rely more than ever on other parties or offshore entities for a growing number of business and information technology processes, the risks involved are on a dramatic rise.

The paper identifies several trends that have increased outsourcing and offshoring risks:

• Companies rely on other parties and/or offshore entities not just for specific projects and back-office functions but more often for core business processes.
• Increased competition for global talent has contributed to shortages of qualified talent.
• Regulatory developments have increased exposure to liability for malfeasance or misfeasance. In some cases, senior management and the board can be held accountable for non-compliance associated with operations of organizations hired to serve the interests of the company.
• Piracy, security breaches and theft of information can erode brand value, intellectual property and other intangible assets, in which companies have heavily invested in recent years.
• A volatile political environment or infrastructure limitations in some popular offshore locations can preclude effective and efficient operations.
• Outsourcing relationships often morph into de facto partnerships, albeit without the analysis, reporting, visibility and control that typically characterize true partnerships.

“To deal with such complex and dynamic risks, companies must employ a Risk Intelligent approach to guide decision making throughout the outsourcing/offshoring life cycle,” said Mark Layton, global leader for Deloitte’s Enterprise Risk Services practice. “Aligning objectives, risks and controls throughout the outsourcing/offshoring lifecycle enables organizations to identify, assess, prioritize and mitigate outsourcing/offshoring risks at the right stage.”

Outsourcing companies are increasingly using risk management in a more strategic role in order to address their own and their clients’ broad business objectives. In fact many companies see risk management as a real challenge while implementing an onshoring or offshoring project. Assessing risk and planning for the business helps not only the customers identify the right partners to offshore with, but also helps the service providers to preempt client needs and manage efficiencies and costs more effectively. “Outsourcing is not about abdicating responsibility but about managing performance. This requires a partnering approach between the client and the service provider to jointly implement best practices, manage risks and thereby manage performance. The risk intelligent approach of Deloitte is an important tool to enable performance management.” Joydeep Datta Gupta, Executive Director, Deloitte India. The Indian outsourcing industry is at a stage where there is a pressing need to innovate and move to the next level of efficiency in managing costs and performance simultaneously. Assessing client risk is a good place to start in order to offer solutions that meet these end objectives.