Top five risks of outsourcing and how to mitigate them

By David Wyer, Head of Supplier Relationship Management, British Broadcasting Corporation (BBC)

Without wishing to be too cryptic or glib – one of the biggest risks in outsourcing is that risks are not identified and worked through. Life isn’t straightforward and things are unlikely to go precisely to plan or expectation. So working out early how disagreement will be handled is important.

The transition after an agreement is a high-risk period – expectations high, potentially pent up change requests, new operating procedures, new integration points – all of this can produce additional work, relationship deterioration and overall a position that needs to be recovered from. Don’t underestimate the fragility of a transition plan – dependencies, obligations, due diligence, realistic timelines, realistic expectations of delivery and change are important mitigations.

Traditionally the focus of a procurement would be to gather exhaustive requirements in an effort to minimise ‘change’ and thereby limiting the client exposure to additional cost or the winning supplier recovering the balance sheet through charging for change. But that approach introduces risk in itself – the pace of business has increased significantly over the past few years and therefore a switch is probably necessary to recognise that what we’re contracting for is the ability to introduce change at a pace, quality or cost that is acceptable.

Sometimes the focus of an outsourcing narrows to the performance of the account team – the issues, missed KPI or milestones. The risk is that we all lose sight of the set of reasons we got into this in the first place, and we don’t do enough to ensure a balanced perspective of the supplier is maintained. It’s important to promote successes or good news stories, to remember that there are benefits to working with other organisations – sometimes global sometimes niche – they bring a perspective or expertise that maybe doesn’t exist within the client organisation.

There’s always a risk that a client organisation focuses on the procurement phase of the lifecycle and misses that benefits both financial and non-financial are realised once into the agreement. The client management team needs to have capacity, capability and empowerment to ensure alignment and achievement of benefits.

Interesting in learning more? Dave will be speaking at the GXP Summit in 2017. Request a meeting with him here.