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BPO: Hiding Operations Under The Bed?

“Go and tidy your room or you won’t get any dessert!” I droop my shoulders and trudge off upstairs to set about the gargantuan task of bedroom tidying. It’s going to be tough. Its one thing to take the mess on the floor and across all available surfaces, but what on earth am I to do with it? For a start, not only will I need to rationalize all of the toys on the floor, I will need to collect all the other boxes and toys that are stored away to properly repack and stow in an efficient manner………..

Or I could throw everything under the bed and cover it with a blanket. I pat myself on the back and give myself 10 out of 10 for lateral thinking. My solution will withstand even a semi-rigorous inspection………

30 years on, and organizations are under similar pressure – the pressure to optimize back-office functions, re-evaluate and re-design processes to leverage technologies and industry best practice, manage resource costs and global deployment. The introduction of new regulation and stricter internal compliance standards provide even further complexities as oversight, control and audit of the same processes are even more paramount.

What can organizations do?  Do they take collect all the mess, take down all the boxes, unpack, re-think, design, re-pack, and test? No, they put it all under the bed and cover it with a Business Process Outsourcing (BPO) blanket! In a period of just months firms can show 15-30% cost reduction, internal process simplification, reduction in headcount and fixed costs and much more. And it can withstand even a semi-rigorous inspection!

However, process outsourcing also carries significant risk of exposure through visibility of confidential assets, processes and data to external parties. It is important that we remember to rationalize and optimize processes before embarking on the outsourcing journey as this will help to protect, limit and track exposure and risks that can be magnified in an outsourced environment. It also enables processes alteration, expansion, decoupling, or even in-sourcing in the future.

Do you leverage business process outsourcing? I would be interested in your feedback. Many organisations have commented that they did not take adequate process analysis, redesign and control steps before embarking on costly projects to implement BPO.

There are many studies to be found that highlight the damage that can be done in an unsecure outsourced environment. This year an Indian outsourcing giant committed a serious fraud of over $1Bn which resulted in disrupted service to many of its clients. Recently another financial institution lost hundreds of thousands in customer funds which were stolen by an offshore outsourcing vendor. The financial impact is trivial when compared to the damage in terms of reputation and regulatory and compliance perception.

How have you prepared for and mitigated these risks, and those posed less intentionally, within your outsourced environments? It is imperative that controls are put in place and that inefficient or flawed processes are not merely thrown into an environment that simply has more people and lower costs.

Finally, a question I am often asked and I would throw out to readers, will BPO take greater importance in business strategy or will we see a decline? Many observers feel that BPO will naturally fade as offshore costs begin to rise, complexities and risks are identified, and higher and higher levels of reporting and management are required. Could this mean that BPO will eventually reach the peak of usefulness and retrace?

Certainly hiding your operations under the bed can be a good use of space, it is often the best way to organize efficiently and remain competitive, but we should be careful not to simply sweep unwanted and problematic processes out of sight and mind.

Remember, at some point you will have to remove the covers - a half eaten sandwich is a whole lot more unpleasant to dispose of after 18 months under a blanket....

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Richard Chapman

Richard Chapman

Head of Strategy

SunGard

Member since

15 Jul 2010

Location

Singapore

Blog posts

11

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This post is from a series of posts in the group:

Financial Risk Management

This network brings together professionals involved in the oversight and management of their company's financial risks and exposures as well as solution vendors, in order to discuss risk issues including interest rate risk, foreign exchange risk and commodity price risk, among others.


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