June 09, 2006
Role of Risk Management in Outsourcing
Changes in operating models and dispersed global footprints of corporations have brought in risks that need to be managed effectively. IT and ITES outsourcing has gained momentum globally over the last few years. It has brought significant changes in operating models as different functions of the same supply chain are now being performed in different environments. Businesses are trying to adapt to this drastic change. The risks have multiple dimensions that include political, economic, geographical, legal, social and technical model risks.
The important indicative risks are business continuity management risks, information security/data privacy risks and process related risks. A full-proof Risk Management model is critical from the business perspective and is a differentiator for outsourced operations. It can be done by adopting quantitative or qualitative methods. Risks need to be carefully analyzed by the top management in order to understand the various options for a cost-benefit analysis. This strategy is crucial in implementing a sound risk treatment plan.
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