This week Charlie discusses the risks associated with outsourcing.
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This week I have been in Oman helping a retail organisation develop their business continuity. Having been in Dubai in the autumn and Oman at the moment, it got me thinking about outsourcing and how we deal with it as part of business continuity development. Oman has many foreign workers mainly from the Indian subcontinent who work at the manual end of the labour market and many who work in middle management and administration. In the company I am working in, the foreign workers are a relatively small percentage compared with the Omani’s. In Dubai it is completely different where 90% of the population are foreign workers operating at all levels within business.
One of the issues associated with outsourcing activities is that you often lose the ability within your own organisation to carry out the activity and you become totally dependent on your outsource partner. How can you monitor the quality and performance of your outsource partner if you don’t really understand how to carry out the activity? If you retain a number of managers within your organisation with the appropriate skills, does that undermine the business case for outsourcing as it is an additional cost? The other issue you have with the outsourced partner is if they fail either to provide the service or go bankrupt are you able to take the service back ‘in house’ without knowing how to carry out the activity? If you are going to totally outsource an activity you should suggest that there is a contingency plan in parallel for taking the activity back in house. This may be unpalatable for those pushing for outsourcing but I believe it is essential to protect your organisation.
As the business continuity manager I feel that it is our job to point out the risks associated with business decisions or even better set the culture within the organisation. Senior managers need to be encouraged to think ‘business continuity’ and take the business risks into account when making decisions.
As well as thinking about the plan for taking the activity back in house, we need to also think about the risks associated with the outsource. Last week we discussed that you can ‘outsource the activity but not the risk’. A full risk assessment has to be carried out to ensure all risks associated with outsourcing are identified. The usual reason for outsourcing is to save money so will the quality of the work be the same by staff who are probably being paid less? Will they have the same attitude and ability to 'do the right thing’ in your company’s interests or will their attitude be to do the ‘right thing’ for their own company? As they are not working for their own company are they more likely to have disgruntled employees who could sabotage the activities and products of your company? Lastly there is a history of companies outsourcing activities and then getting caught up in disputes between the outsourced company employees and their management. What steps can you take to ensure that this does not happen?
Sometimes it is right for the business to outsource an activity and so we as business continuity managers have to accept this and develop our plans or ensure that the outsourced company develop their plans appropriately.
Coming back to Dubai. If you have a country that has 90% of its activities from the highest level to the most menial of tasks carried out by non nationals, how do the locals cope if those providing the services go home? Non-Dubai nationals have very few rights and are at the whim of the Government for their status. Although many non-Dubai nationals may call the state their home, they also have a passport and another country of origin they can return to so they have less of a stake in the state. My personal feeling is that if there was a mass outflow of people out of the country, the locals would struggle to carry out many of the jobs, especially in critical infrastructure as they have outsourced the running of it. Outsourcing has its benefits but it also has its risks.