Outsourcing Business Processes ( without In-sourcing the Associated Risks)
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Outsourcing Business Processes (without In- sourcing the Associated Risks) Gregg Anderson – Crowe Horwath (risk manager) Doug Tripp – Crowe Dunlevy (outsourced provider) Leslie Lamb – Cisco Systems, Inc (facilitator) RMG 303 April 2012
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Outsourcing Business Processes ( without In-sourcing the Associated Risks). Gregg Anderson – Crowe Horwath (risk manager) Doug Tripp – Crowe Dunlevy (outsourced provider) Leslie Lamb – Cisco Systems, Inc (facilitator) RMG 303 April 2012. The Scenario. - PowerPoint PPT Presentation
Transcript of Outsourcing Business Processes ( without In-sourcing the Associated Risks)
Outsourcing Business Processes (without In-sourcing the Associated Risks)
Gregg Anderson – Crowe Horwath (risk manager)Doug Tripp – Crowe Dunlevy (outsourced provider)Leslie Lamb – Cisco Systems, Inc (facilitator)
RMG 303April 2012
The Scenario
• Sport Co is an industry leader in manufacturing sporting goods products and services
• Revenues are $1B annually• Headcount is 10,000 worldwide• Headquarters is in North Carolina• Major locations include North Carolina,
California, Bangalore and London
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The Challenge
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The COO’s Worst Nightmare
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The Solution
• Outsourcing – Information technology infrastructure
services, including data centers– Supply chain management–Customer care
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The Risk Manager
• Identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.– Derived from COSO ERM Definition
• In other words – “Manage risk to achieve objectives.”
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Financial
Human Resources
Integrity
Market StrategicMarket• Macro Economics• Customer Economics• Financing• Competition• Consolidation
Financial• Foreign Exchange• Budget• Revenue Recognition• Financial Reporting• Access to Funding• Margin
Human Resources• HR Compliance• Attract, Develop &
Retain Talent• Employee Morale &
Culture
Strategic• Right Solutions• Business Model• Brand & Marketing• Growth• Acquisitions• Organizational Design
& Resources
Integrity• Regulatory
Compliance• Legal• Fraud• Data Security
Operations
Operations• Facilities• Business Disruption• Policies & Procedures• Decision Making• System Capabilities
• Authorization• Costs & Efficiencies• Customer Service• Contracting
• Training• Aging Workforce• Incentives &
Compensation
Our Enterprise Risks
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Financial
Human Resources
Integrity
Market StrategicMarket• Macro Economics• Customer Economics• Financing• Competition• Consolidation
Financial• Foreign Exchange• Budget• Revenue Recognition• Financial Reporting• Access to Funding• Margin
Human Resources• HR Compliance• Attract, Develop &
Retain Talent• Employee Morale &
Culture
Strategic• Right Solutions• Business Model• Brand & Marketing• Growth• Acquisitions• Organizational Design
& Resources
Integrity• Regulatory
Compliance• Legal• Fraud• Data Security
Operations
Operations• Facilities• Business Disruption• Policies & Procedures• Decision Making• System Capabilities
• Authorization• Costs & Efficiencies• Customer Service• Contracting
• Training• Aging Workforce• Incentives &
Compensation
Sample Risk UniverseTraditional Third Party Risks
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Financial
Human Resources
Integrity
Market StrategicMarket• Macro Economics• Customer Economics• Financing• Competition• Consolidation
Financial• Foreign Exchange• Budget• Revenue Recognition• Financial Reporting• Access to Funding• Margin
Human Resources• HR Compliance• Attract, Develop &
Retain Talent• Employee Morale &
Culture
Strategic• Right Solutions• Business Model• Brand & Marketing• Growth• Acquisitions• Organizational Design
& Resources
Integrity• Regulatory
Compliance• Legal• Fraud• Data Security
Operations
Operations• Facilities• Business Disruption• Policies & Procedures• Decision Making• System Capabilities
• Authorization• Costs & Efficiencies• Customer Service• Contracting
• Training• Aging Workforce• Incentives &
Compensation
Sample Risk UniverseExpanded Third Party Risks
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Understanding the Objectives
Primary Objective: Reduce Operating Cost
Secondary: Maintain Fixed Costs below a target % of Revenue
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Other Objectives of Outsourcing
• Improve Results – leverage the outsourcer’s expertise
• Re-focus on core competency – redirect management’s skills toward what made Sport Co. the industry leader
• Improve customer experience• Compliance
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Understanding the Objectives
Reduce Operating Costs
Outsource IT Infrastructure Reduce Spend
Outsource Supply Chain Management Improve Resiliency
Outsource Customer Care
Improve Performance
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Anticipating the Risks
Reduce Operating
Costs
Outsource IT Infrastructure Reduce Spend
Loss of Talent
Data Breach
Outsource Supply Chain Management
Improve Resiliency
Business Disruption
Outdated Systems
Outsource Customer Care
Improve Performance
Brand Deterioration
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Understanding the Risks•Operational – poor service, disruption in operations, loss of control, deterioration
•Financial – overruns, change requests, 3rd party charges, the outsourcer’s solvency
•Compliance and Security – data breach, disclosure of sensitive information / customer data / PII or PHI, compliance with laws
•Extraordinary Risks – armed conflict near service facility, tsunamis and earthquakes, major security breaches
•Brand Reputation – spans across all of the above
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Engaging the Outsource Provider(things to think about)
Super IT Consultancy - Outsourcing IT Infrastructure• Flow of information from SportCo to Super IT• Super IT’s storage facility: cloud or data center• Understanding the type of data stored: HR related, customer
info etc• Contractual issues • Super IT’s compliance with standards i.e. PCI• Super IT’s call center availability
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Engaging the Outsource Provider(things to think about)
Flexible Outsourcing International – Contract Manufacturer• Location, location, location
• what are the hazards?• International or US?
• Flexible’s Quality Control Program• Intellectual Property• Contractual issues • Flexible’s Business Continuity Program• Social Responsibility• Environmental Responsibility• Political Issues (terrorism, govt unrest, employee care)
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Engaging the Outsource Provider(things to think about)
Accentumetrics Technical Responders – Outsourcing Customer Care
• Location and language• Hours of operation• Training programs• Brand reputation• Intellectual Property• Contractual issues• Social Responsibility• Political Issues (terrorism, govt unrest, employee care)
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Managing the Risks via the Contract
• Robust Governance Provisions• Comprehensive Audit Rights• Contractual Requirements– Continuity of Key Personnel– Compliance with Laws– Mandatory Technology Refresh / Release Versions– Key Performance Metrics with Meaningful
Remedies
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