Risk is an unavoidable part of business. But when you outsource business processes to a third-party provider, you open up your company to a whole new set of risks.
Think about it, you’re essentially handing over control of critical parts of your business to someone else. It’s obvious to see why this could be a problem.
So what exactly are the risks associated with business process outsourcing (BPO)? And more importantly, how can you protect your company from them?
In this article, we will delve deeper into the topic of BPO risks, discussing what they are and how you can mitigate them to keep your company going strong.
Recap of BPO
Before we get into the risks associated with BPO, let’s first quickly recap what outsourcing business processes actually entails.
In short, BPO is the contracting of a company’s business processes to a third-party service provider. This can include everything from customer service and technical support to data entry and accounting.
The main appeal of opting for BPO is that it can save your company time and money — two things that are always in short supply for businesses. When you outsource business processes, you free up your own employees to focus on more strategic tasks, and you also benefit from the economies of scale that come with working with a larger service provider.
Of course, there are also risks associated with BPO — which is what we will be discussing in more detail below.
Why is BPO Risky?
There are a few reasons why BPO can be risky for businesses. Let’s go through 6 of the key risks associated with BPO in further detail:
1. Loss of Control
First and foremost, when you outsource business processes, you are handing over control of critical parts of your business to someone else. This means that if something goes wrong, it could have a major impact on your company.
Let’s take an example where you outsource your customer service function to a third-party provider. If that provider does not handle customer queries properly, it will reflect badly on your company — even if the issue is not directly your fault.
2. Data Security Risks
When you hand over control of your data to a third-party, there is always a risk that it could be leaked or hacked. This is a serious concern for many businesses, particularly those in industries with strict data privacy regulations (such as healthcare and finance).
Take steps to ensure that your data is properly secured by your BPO provider, and consider investing in additional data security measures (such as encryption) to further protect your sensitive information.
3. Contractual Risks
When you sign a contract with a BPO provider, you are essentially entering into a legal agreement with them. This means that if anything goes wrong, you could be held liable.
Make sure that you thoroughly review any contracts before signing them, and be sure to understand the terms and conditions. If you have any concerns, get in touch with a lawyer who specializes in outsourcing agreements to get their professional opinion.
4. Dependency Risks
Another key risk associated with BPO is dependence on the provider. When you outsource business processes, you are putting your company in a position where it is reliant on the third-party service provider.
This means that if they experience any problems, it could have a knock-on effect on your business.This can be a problem if they unexpectedly go out of business or are unable to meet your needs for some reason.
For example, if your customer service provider goes down for maintenance, your customers will not be able to get in touch with you — which could cause them to take their business elsewhere.
Bringing business processes back inhouse means you aren’t dependent on anyone, which could be a big plus for some companies that like being in control.
To mitigate this risk without going inhouse, it’s important to have a contingency plan in place in case your BPO provider is unable to deliver on their end of the agreement.
5. Reputational Risks
Your company’s reputation is on the line when you outsource business processes. If your BPO provider makes any mistakes and are not meeting your expectations, it reflects poorly on you as well.
For example, if you outsource your data entry function to a third-party provider and they make mistakes in the data they input, it could cause problems down the line for your company.
There is always a degree of uncertainty when you outsource business processes, and you need to be prepared for that. To protect your company’s good name, be sure to vet your BPO providers carefully and only work with those that have a proven track record of success.
6. Cultural Risks
When you outsource business processes, you’re also outsourcing the people who will be working on those tasks. This can lead to cultural clashes if there are significant differences between your company’s culture and that of your BPO provider.
To avoid this, try to find a BPO provider whose values and culture are compatible with your own. This may mean engaging in onshore outsourcing instead of going offshore.
10 Characteristics of a Good BPO Provider
Not all BPO providers can deliver on their promises, which can put your company at risk. Here are the ten characteristics you must look out for:
1. They Have a Proven Track Record
The first thing you should look for in a BPO provider is a proven track record. You want to work with a company that has extensive experience in delivering the services you need — and who also has a good reputation.
2. They Offer a Comprehensive Service
A good BPO provider will offer a comprehensive service that covers all aspects of the process you’re looking to outsource. Make sure you understand exactly what’s included in the service before you sign on the dotted line.
3. They’re Flexible
Your business is unique, so you need a BPO provider who is willing and able to tailor their services to your specific needs. Look for a company that is flexible and can adapt their offering to suit your requirements.
4. They’re Cost-Effective
Outsourcing business processes can save you money, but only if you choose a cost-effective BPO provider. Make sure you get a few quotes before you make your final decision — and don’t be afraid to negotiate on price.
5. They Have a Solid Infrastructure
A good BPO provider will have a solid infrastructure in place, including the latest technology and systems. This is important as it will ensure that the services they provide are of the highest quality.
6. They’re Scalable
As your business grows, you’ll need a BPO provider who can scale their services to meet your increasing needs. Look for a company that has the ability to expand their offering as you grow.
7. They’re Reliable
When you outsource business processes, you’re putting your trust in the hands of the BPO provider. Make sure you choose a company that is reliable and who you can trust to deliver on their promises.
8. They Have Good Communication Skills
Good communication is essential for any business relationship — and it’s especially important when you’re outsourcing. Make sure the BPO provider you choose has good communication skills and that you feel comfortable communicating with them.
9. They’re Experienced in Your Industry
If possible, you should look for a BPO provider who is experienced in your industry. They will have a better understanding of your specific needs and requirements.
10. They Offer a Competitive Service
Finally, make sure you choose a BPO provider who offers a competitive service. There are many providers out there, so take the time to compare their offerings before you make your final decision.
These are just some of the things you should look for in a BPO provider. By finding a company that ticks all of these boxes, you can be sure that you’re making the best decision for your business.
5 Ways to Minimise BPO Risks
There are a number of risks associated with business process outsourcing, but the good news is that there are also ways to minimise these risks. Here are some of the key things you can do to protect your company:
1. Do Your Homework
When you’re looking for a BPO provider, it’s important to do your homework and choose a reputable company that has experience in your industry. Avoid working with fly-by-night providers — they’re more likely to cut corners and put your company at risk.
2. Set Clear Expectations
Before you sign on the dotted line, make sure you set clear expectations with your BPO provider. What exactly are they responsible for? What are the deliverables? When do you need them delivered by? Having a clear understanding of what is expected from both sides will help to minimise misunderstandings and disagreements down the road.
3. Regular Communication
Once you start working with a BPO provider, it’s important to maintain regular communication. This way, you can stay up-to-date on their progress and provide feedback as needed. If there are any problems, you’ll be able to catch them early and take corrective action.
4. Have a Backup Plan
No matter how well you vet your BPO provider, there’s always a chance that something could go wrong. That’s why it’s important to have a backup plan in place. What would you do if your BPO provider suddenly went out of business? How would you keep your business running?
By thinking about these things in advance, you’ll be better prepared to deal with any problems that may arise.
5. Review Contracts Regularly
We can’t stress this enough. Don’t forget to review your BPO contracts on a regular basis. Things can change over time, and it’s important to make sure that your contract still reflects the current situation.
If anything needs to be updated, don’t hesitate to make the changes.
BPO risks are a reality of outsourcing business processes to a third-party provider. But by being aware of the risks and taking steps to mitigate them, you can protect your company from potential problems.
Have a look at some of the risks above and the tips to mitigate them as much as possible. BPO can be an excellent idea for any company — just be sure to approach it properly.