Global Services – Global Supply Risk Management: Monitoring and Managing Global Sourcing & Services Outsourcing Risks
Posted on November 1, 2011 by Atul
Introduction: State of the Outsourcing World
Today, outsourcing has become a mainstay of corporations. It is mainstream, it is global and it is rapidly changing. This dynamic has a huge impact on the competitiveness of global corporations. Yet, global sourcing is not what it was even a few years ago. Its complexity has risen manifold. It embraces multiple locations and multiple processes as companies seek, presumably, to optimize the gains from outsourcing and offshoring. This rise in use of outsourcing has been dramatic, exponentially raising the potential for outsourcing corporations and for nations seeking to provide the services. But it also has raised risks and brought on newer, and varied, risks, many of which are not fully assessed by risk managers. According to Gartner, the top 30 outsourcing destinations are emerging markets that bring varied and often high risks.
Over the past year, in particular, many of these risks have been brought to light by global events. Take the geo-political situation in Egypt that led to an unprecedented nine-day Internet shutdown; or the recent hurricane and floods in the USA that caused disruptions in operations from the south to the north-east. These two situations, in sharply contrasting locations – one, an emerging outsourcing hub and the other one of the world’s most industrialized nations – represent, probably, the worst nightmares of operations and outsourcing managers. But they are, by no means, the only possible doomsday scenarios. There are many other time bombs ticking away all the time, arising from the unique character of each country and city, endemic risks from financial turmoil such as the one in Greece and Portugal, policy-driven dynamics and even supplier-specific vulnerabilities.
Still, the higher risks are no reason for companies to turn the clock back on outsourcing or give up on further gains. The need of the hour, instead, is a proactive, and effective, risk-monitoring mechanism and strategy. This paper evaluates ways to monitor, predict and manage Global Sourcing & Outsourcing risks. In this paper, we assess the causes and the consequences of these risks, before presenting a model risk-management system that can monitor the risks, predict possible future occurrences of these risks and pro-actively manage them, ensuring buyers and suppliers can sustain, and even further, the gains from outsourcing and offshoring.
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