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Risks in Offshoring Seminar Wed 29 Feb - Event Highlights

by sourcingfocus.com

Offshoring is often thought to be a risky business. But risk and reward go hand-in-hand; they’ve been stepping out together longer than Prince Phillip and The Queen. And nowhere in the outsourcing world are risks more prominent.

For risks in offshoring are manifold – only by deeply understanding the nuances of offshoring can you identify, account for and attempt to minimise the potential for disasters.
Broadly speaking, the risks associated with offshore are strategic, financial, process and technology, regulatory/legal. Mr Ritesh Gandhi of Infosys BPO ran thorough examples of specific types of risk in these categories and their impact on the wider organisation.

Mr Gandhi then moved on to how things go wrong, explaining the failure points of neglecting to plan properly and the impact of offshoring on people in your company. When you offshore, staff are either made redundant, or redeployed or rebadged. Mr Ghandi spoke about using external advisors to help with the change management, before moving on to detail how companies offshoring need not just look at the current legal landscape offshore, but into the future, to foresee potential regulatory change. His presentation also covered a host of things to think about when selecting an offshore vendor, and the problems that a lack of experience can bring about. Failing to choose the right mode of evaluation i.e. arm’s length vs collaborative or overestimating an organisation’ delivery competence due to getting sucked in by an expert sales team can be fatal.

Ashley Winton, Partner at legal firm White & Case was next to present. He opened with a brief run through of Data Protection regulation then moved swiftly on focusing on the intersect between contractual terms and insurance policies. He moved his attention to governance and contractual mechanisms to anticipate of risk and distribute liability, before explaining how best to deal with poor performance. Another key risk in offshoring is law variations, international versions of standards akin to ISOs – Ashley closed his presentation by discussing these.

Clients often perceive that the client has less control over its data when outsourcing. This was the initial focus of Mark Fishleigh of Detica. Fears of malicious or criminal employees in positions of trust or vendors using IP to enter into direct competition are among the many worries of offshorers old and new. Mark got into the nuts and bolts of security and confidentially metrics, due diligence and insurance. This included a study on insurance clauses account for quality and scope of coverage for all your key risks, and in keeping with Mr Ghandi’s presentation, he talked of looking into the future and predicting changes.

The final presentation of the day came from Emily Freeman of Lockton International, who compared the client vs outsourcing vendor view of risk.  She talked about deals with vendors as the insurance underwriter and paranoia sets in when deep in discussions, that don’t translate to contracts. In some situations, IP is not always secure, not just trade secrets but wealth of know-how and sensitive corporate information.

The group then divided into small teams for a ‘mock’ case study, that focussed upon ‘Peter’ a fictional outsourcer, and wannabe offshorer – the task was to help Peter, by pooling the groups knowledge to prepare a robust offshoring strategy. The interactive facets are always the most popular parts of the session – and the group was highly engaged throughout.

In summary, it would seem that probability of risk has not changed but impact has got greater.There are many different profiles of risks. Maturer destinations have different risks than less developed ones – risk changes with maturity, and each country has its own culture and characteristics. Take time to get to know the people, and you’ll get to know the financial implications in due course – and due diligence. Never rush. Make sure you study the local laws, and always, always get the contract and the insurance working in perfect synergy. 


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