Skip to content
Home » Does business process outsourcing minimise risk and uncertainty?

Does business process outsourcing minimise risk and uncertainty?

By Tennille Bell, national general manager: sales at Programmed Process Outsourcing

Companies can face risk from every angle – be it supply and demand, health and safety, labour relations, or change management.

Business process outsourcing enables all risk and responsibility for outsourced functions to be transferred. Image credit: SeeFromTheSky | Unsplash

Business process outsourcing enables all risk and responsibility for outsourced functions to be transferred. Image credit: SeeFromTheSky | Unsplash

Non-compliance or failure to mitigate risk can have enormous consequences, but how can organisations mitigate and manage risk without taking too much time away from core business functions? With business process outsourcing (BPO), enterprises can delegate one or more of their non-core, time- or resource-intensive functions to a specialist external provider who owns, optimises and oversees these based on defined, measurable performance metrics.

Non-compliance is risky business

With such a high legislative compliance burden on most industries, risk mitigation is important from both a strategic and operational perspective, but this is no small ask for most businesses.

Considerations like financial risk, liability risk and even reputational risk can be overwhelming, but when a company suffers a reputational loss, it also loses its competitive edge along with customers. This results in decreased profitability, and depending on the severity of the risk materialising, could even result in an inability to continue operating. What does all of this mean? Compliance and risk management cannot be ignored or overlooked.

Register for free to gain access the digital library for RACA Journal publications

Through BPO, enterprises can relieve the pressure of compliance on their internal resources and benefit from delegating the risk to an external specialist enablement provider when outsourcing one or more of their business functions. Organisations that manage their risk effectively are better equipped to avoid the risk entirely, or pre-emptively implement action plans to overcome the incident as quickly as possible to minimise negative impact.

When risk becomes a problem

Businesses that do not manage risk and compliance in an ongoing manner are more likely to miss warning signs and become ill-equipped to handle risk events as they arise. In such cases, organisations have reached a point where the risk is no longer just a risk, it’s an actual problem with moderate to severe effects on the organisation depending on that particular risk event.

An inability to roll with the punches leads to process inefficiencies, a decrease in productivity and poor quality products. This is a snowball rolling downhill, gathering momentum through poor customer satisfaction, loss of competitive edge and ultimately, decreased profitability.

Risk can be outsourced

The biggest drawcard to BPO for businesses is that all risk and responsibility for outsourced functions lie with the BPO provider, who becomes an external contractor performing that function on-site. In order to effectively outsource risk, it’s important that organisations partner with a BPO provider to verify that their outfit is financially sound, legally compliant and in a position to manage that risk for as long as is necessary.

What are some of the risks that can be minimised through BPO? One of the most significant risks in any business relates to employment, but labour relations is not a function that comes naturally to most companies. As a result, the labour component is one of the most beneficial areas to outsource, not only from a risk perspective, but from a cost and efficiency aspect as well. Each business process that is outsourced is thoroughly assessed by the BPO provider to identify inefficiencies and provide solutions that will streamline operations.

Partner with benefits

Change management is handled by the BPO provider throughout, and accountability for the business function is then managed in terms of a service level agreement, with measurable performance indicators. Employment costs move from fixed wage costs, to flexible costs based on output, in terms of which workers are paid for meeting productivity targets.

Quality risk resides with the BPO provider, which further alleviates the risk of wastage. This BPO model also offers businesses significant savings when it comes to catering for seasonal dips in production demand, making it easy for the business to scale as needed without incurring additional labour costs or risks.

Choosing the right BPO provider can be a make-or-break decision for businesses. To avoid making the wrong choice, organisations must look for an established, reputable partner with a national footprint, in addition to being financially sound and legally compliant themselves. It is also necessary to select a partner that is transparent, as this is necessary in order to build and maintain a mutually beneficial relationship that results in the effective management of risk while sharpening the competitive edge.

Register for free to gain access the digital library for RACA Journal publications