What are the risks involved with business process outsourcing (BPO)?

Outsourcing has brought revolution many years ago with the rise of globalization and has ever been then financially benefiting India. Different organizations, especially from the developed countries, outsource their business activities, functions, and processes through contractual agreements to developing countries like India in order to reduce the organization cost and focus on core business activities. Along with many mutual benefits, companies face mutual losses if they entertain communication gaps. Outsourcing is a common business strategy nowadays. India is abundant in resources, especially in providing efficient manpower at suitable prices. It is vital for businesses to plan the budget for core and non-core business processes. According to the research done by our experts, If an American company outsources its non-core business processes to Indian BPOs handlers, they save approx. 45% more. There exist many other benefits of outsourcing like improved operational efficiency, better management with improved quality and higher business satisfaction scores. However, cheese doesn’t always stay fresh if not taken care of with preservatives. There are also some disadvantages associated with outsourcing which asks for attention. The disadvantages of outsourcing for most small businesses are limited but they do exist.

Every company follows some standard rules of procedures that must stay intact and followed in order to stay compliant.  The cost-benefit of outsourcing depends on two factors:

  • BPO partners perform their tasks based on a mutually-agreed standard.
  • BPO partners follow a predictable and stable workflow at established costs.

As long as these two factors are assumed to be true and in practice, work is under control. If there exists any gap, be it a communication gap or negligence, things are likely to mess up. Failing to meet standards can lead to value leakage across the enterprise, at both the ends. Business leaders and decision-makers need to make fully informed decisions after analyzing properly if they are going to manage and mitigate BPO risks. The first step towards accomplishing this goal is to understand the nature of the risks they’re up against. They must understand partnering with an experienced and reliable BPO company in order to narrow the chance of failure. There can be many risks associated with BPO, but broadly they fall into two categories: operational risks and strategic risks.

Operational Risks in Business Process Outsourcing

Operational risks include quality and efficiency-related issues. With all the advancements technology has brought to the world, the chances of error and compromises in quality are close to null. The companies’ focus is now more on customer satisfaction and ensuring positive customer experience. Business leaders must be fully aware of the fact before partnering with a BPO that they are relying on a third-party to help them achieve their client’s satisfaction.

 At CNS, we present all the procedures, and processes to our client on our own, so that even if the business leader does not check, they can sit free and know how their quality is consistently maintained over time. By incorporating performance-based contracts into the partnership that equitably share the risk of low quality with the service partner, we provide a solution. Before partnering with clients, BPO service providers must present a plan in place for how they would manage a sudden and unexpected surge in call volumes and manage challenging customer service situations  to ensure long-term operational performance and financial solvency

Strategic and Security Risks with BPO Partners

One of the most important disadvantages of outsourcing is the risk of exposing sensitive and classified information to the company. The 2018 Cost of a Data Breach Study by Ponemon reports that the global average cost of a data breach has risen by 6.4% with the average cost to a U.S. company being nearly USD 8 million. Before finalizing any deals with a BPO, organizations must conduct an intensive review of their protocols to make sure that they follow industry-class security and privacy practices. CNS has attained invaluable expertise, garnering more than 14 years of experience as a BPO partner. Over the years, we have developed; tested and proven integrated BPO solutions, which leave our clients with trust. 

It may be convenient to take shortcuts and share everything all at once, but organizations should resist that urge and provide their BPO agencies requirements and other documents consistently. Companies need to go beyond the fine print and carefully consider every piece of data that they share with a BPO. Instead, they should create a filtered list of only the necessary data items that the BPO needs access to just the necessary moments in order to do their task. All good businesses are built on trust. And in an increasingly connected business landscape, trust is a commodity worth every penny. With the right BPO partner, organizations don’t have to make the difficult choice of choosing between security, reliable service, and trust – they can have all three. Companies need to ask more from their BPO partners and develop partnerships that are built for the long term. By carefully considering the credentials and capabilities of their partners, organizations can rest easy knowing that their brand is in safe hands and that their values are upheld by partnerships built on trust.

Security risks encompass the assortment of intellectual property protection, privacy requirements and data security that are common to modern companies. As organizations begin to work with BPO companies, there is a degree of overlap in shared information which in many cases is proprietary and privileged. This information can include anything from a company’s own intellectual property such as applications and protocols to information pertaining to a company’s customer base such as billing information, personal health or financial data, etc.

However, the fear of security breaches and data leakage will always be a concern. Under BPO partnerships, companies have limited control over the BPO’s internal security architecture and privacy protocols,( it depends on the credibility of the BPO service providers, that proper documents are shared and communicated). It is indeed BPO’s responsibility to ensure confidentiality and maintain all the legal compliances. And while signing a confidentiality contract may be legal recourse to this risk and offer some degree of mitigation, it is not entirely enough. Organizations must make every effort to ensure that the data entrusted to BPO providers is protected and every precaution is in place against potential breaches.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.