Managing risk: 20 questions you should ask before you decide to outsource

Managing risk is essential for business success
Managing risk is essential for business success

The ability to manage risk effectively is a critical attribute for every business leader. Some prefer to manage risk within their organisation through meticulous planning and tight controls, while others choose to outsource business functions to service providers, and let them ease the burden. But does outsourcing increase or decrease risk? The answer depends on what, when and why you’re outsourcing. For a small business with limited payroll budget, outsourcing can be a great way to get access to expertise you might only need at certain times in your business calendar – but it doesn’t come without risk.

Every business function can be outsourced, from mail operations, IT, tax, legal services, payroll and accounting to security, facilities management, HR services, creative services, field sales, communications and customer support. Even the largest organisations can’t always do everything themselves and accept that, to grow their business, it makes sense to outsource. Research shows that 40% of business leaders currently or plan to outsource business processes, with the main reasons for this being cited as to generate efficiencies (57%) and to reduce cost (55%). Tax and accounting (49%) and IT (46%) are the main processes companies currently outsource.

The same research, though, reveals that the majority of business leaders are actually reluctant to outsource, with 44% unwilling to lose control of a key process and 27% concerned about the business risk associated with outsourcing a key process (1). For some, the consequence of relinquishing control doesn’t bear thinking about – with hefty fines for non-compliance, they like to hold on tight to their business operations.

If you’re considering outsourcing, it’s worth carrying out some detailed research first. Taking time to do this, and to elicit responses from service providers, will pay dividends and will protect your organisation. Here are 20 questions to ask your service provider before you sign on the dotted line:

  1. Can I meet the person or team who’ll be working on my account and stay in regular contact with them?
  2. How often would we have review meetings?
  3. Would you be happy to sign a non-disclosure agreement?
  4. What are your business continuity plans and SLAs?
  5. How will you store, clean, update and secure my customers’ physical and digital data?
  6. Can you demonstrate compliance and let me know of the industry standards you meet?
  7. What happens if things go wrong, such as my customers receiving the wrong information – who is liable?
  8. Are you set up to deal with digital and physical communications?
  9. How often is your technology updated?
  10. How quickly can you respond to last-minute requests?
  11. Do you use SaaS-based platforms and if so, will I have access to them?
  12. How are these cloud platforms protected?
  13. How do you ensure accuracy and precision in what you do?
  14. What kind of pricing plans and payment terms do you have?
  15. Who are your other clients and what measures do you take to protect competitor intelligence?
  16. Does your workload vary according to season and how are you set up to cope with this?
  17. Which other businesses do you work with in my particular vertical industry?
  18. What kind of analytics can you provide? Can you provide me with figures to demonstrate productivity?
  19. Is your technology equipped with sensors so you are ‘industrial-internet’-ready?
  20. What are your plans for growth?

The insourcing v outsourcing debate will continue, increasingly so as the regulatory environment demands more robust compliance, the fines for data breaches escalate, and businesses continue to seek ways to leverage physical and digital worlds. Arm yourself with the answers to the above 20 questions, though, and you will be equipped to make a decision that helps your organisation balance risk effectively.

(1) Grant Thornton’s International Business Report