Outsourcing Risks - An Insight Into Risks Involved in Outsourcing and Ways to Reduce Them

With expertise and intense competition becoming the norm of the day, companies are virtually left with little or no time to handle various aspects of their businesses. Hence, many are mainly dependent on outsourcing. However, the undertaking has perils of its own and those planning to outsource work should be well-versed with these outsourcing risks and be well-prepared to tackle them.

While outsourcing helps companies in their ventures, the involvement of third parties is not without its fair share of risks. The outsourcing risks involved are even greater when allotting work to offshore companies. In such cases, there are several issues that have to be considered painstakingly before finalizing a business deal with offshore partners.

When partnering with companies in far away lands, businesses are quite likely to face these outsourcing risks:

1. Unstable political environment and legal hassles - If the projects are outsourced to a country marked by political instability, a company can suffer immensely due to the prevailing political conditions and erratic laws. In such a case, the outsourcing plans require a thorough re-evaluation.
2. Project risks - How successful their project would be in a foreign land depends on how the parent company deals with the enterprise that is being given the contract.
3. Failure of plans - Too much dependence on an offshore service provider coupled with the lapse on the part of the management to keep a tab on their operations can often result in the failure of a project.

Outsourcing risks are in no way minimized even when partnering with local establishments. As far as IT institutions are concerned, these are always at risk as they deal with information. These companies always face the risk of data leaching and other kinds of fraud by the third party.

Apart from this, the service provider may fail to deliver the goods in time, which often leads to disputes between the partners. The outsourced services are hardly rewarding in the first year of the contract.

Here are some tips that can help minimize your outsourcing risks.

Be dynamic in your dealings with your service provider. A strongly worded and clearly laid out contract is the first step towards minimization of these outsourcing risks.Companies should lay out a risk model prior to outsourcing business, which should take into account factors as trade policies.

Outsourcing of work calls for strong relationships. Companies outsourcing work to service providers must ensure two-way communication between them and the third party. Both business partners should share their aims, obligations and incentives in the interest of success of a venture.

Projects are liable to undergo changes every now and then. Hence, companies outsourcing work should reconsider and confirm their priorities while the project is in progress. Employees of a company, who have lost their jobs due to outsourcing, could prove to be another major threat to a project.

So the best way out in such circumstances would be to minimize this risk by talking to them to assuage their hurt feelings by assuring benefits and logistical and financial assistance to them as and when they may need it.

No matter how many risks may be involved in it, outsourcing is always the best deal for any business enterprise if they wants to focus on its basic goals and beat its rivals.