Risk

Risk management

Loosing competitive advantages

Identify core competences and process candidates to outsource

Outsourcing for the wrong reasons

Know your reason for outsourcing

Future impact on mergers and acquisitions

Have suitable exit and re-assignment clauses in the contracts

Lack of executive support

Make sure that the outsourcing initiative has executive support.

Risk

Risk management

Financial instability of the outsourcing partner

Have credit ratings and guarantees

Operational failure of the outsourcing partner

Analyse capabilities, capacities, domain knowledge and past references carefully

Inadequate change management capabilities

Make sure your partner is flexible anough

Failure to align goals

Make sure the partners understand each other and the goals of the outsourcing partnership are aligned on a win-win basis

Cultural fit

Make sure that corporate, work and social culture fit well. Do not hide your culture and your expectations in this area. Language capabilities are very important in offshore operations.

Geopolitical risks

Going offshore holds geopolitical risks. Spread this risk by operating in various geographies and retain onshore capacities

Risk

Risk management

Inadequate resources to manage the contracting and transition phase

Have separate project teams available on both side

Service level irregularities

Disclose your present and expected service levels.

Inadequate measures in place to ensure the acceptable service level

Employ a fair risk and reward sharing structure on the contracts

Unclear risk structure and liabilities

Monitor risks and allocate risk sharing

Unclear charges and fees

Make sure you understand the drivers behind the fee structure. Build in the contracts flexibility and fairness as well as  reward - penalty structure

Lack of benchmarking and measurement

The SLA and contract should be clear on baseline benchmarking as well as on performance measurement

Inadequate specifications

Seek professional legal, commercial and domain expertise during contracting

Lack of knowledge on legal and regulatory obligations

Use best practices guidelines and seek professional advice

Unrealistic expectations

Have a well designed change management program in place

Lack of continuity and exit planning

Make sure that there are satisfactory exit options built into the contracts for both parties. Plan for continuity but think of exit scenarios as well.

Transfer of resources

There must be business and service level continuity with minimum redundancies.

Risk

Risk management

Lack of executive relationship

Keep it simple, but manage it. Have regular contacts at executive management level

Skill requirements change

Invest in professional staff selection and training

Insufficient resources

Manage and prepare the supplier in time of changing resource requirements

Resistence of stakeholders

Inform and involve the key stakeholders of every important step of the outsourcing process.

Inadequite change management

Change must be managed and documented