Supplier Risk Monitoring

Three Categories of Third Party Risks with BPOs

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Business Process Outsourcing (BPO) has generated an incredible amount of value over the years for companies. A lot of firms, small to large, outsourced their people-intensive functions such as payroll, accounting, telemarketing, data transcription, customer support, and others to specialized services providers. Typically, BPO vendors were located in countries like India, Philippines, or Ireland, which had advantages such as low labor costs, availability of fairly large skilled talent pools, combined with English language proficiency.

There is still value to be derived from BPO.

BPO growth, and by extension ITES, may seem to have plateaued. However, the BPO industry has seen itself through rough patches before.

BPOs have positioned themselves to be more than just hands on a keyboard. In their new technology-focused avatar, they can still unlock value for enterprises through their specialized automation capabilities, flexibility, and reduced costs.

Like other industries, automation will be vital to the BPO industry as well. BPO companies have invested in up-skilling employees and in avenues for non-linear growth. Many have focused on developing capabilities in robotic process automation (RPA), which enables them to put themselves on a high growth, high margin trajectory for the future.

Another major focus area for the BPO industry is establishing Business Transformation Offices (BTOs) to drive transformation efforts across traditional business support functions.

New BPOs Destinations to Emerge in 2020

It’s no longer just India or Philippines when it comes to outsourcing. New destinations are emerging and developing their own niche.

  1. Bulgaria: In 2018, Bulgaria was the 12th most desirable outsourcing location in the world mainly due to availability of workers speaking all major European languages.
  2. Romania: 54% of graduates have a background in science and technology; has the second lowest salary of around 300 Euros per month.
  3. Egypt: Booming infrastructure, including Silicon Waha’s technology parks.
  4. Mexico: A huge talent pool of around 5,00,000 IT professionals working in the BPO sector.
  5. Colombia: Investment growth due to the depreciation of the Colombian peso.

While outsourcing is glamorous again, it is vital to look at the potential pitfalls.

As with any major business decision, there is a significant amount of latent risk in outsourcing too:

From crippling cybersecurity breaches to layoffs to workplace issues, any number of risks can disrupt the operational readiness of a BPO vendor:

Cybersecurity Risk: A third-party that has access to your company, or customer, data must be considered a critical supplier. Are you familiar with the cybersecurity posture of your BPO vendors? How often do you assess their cybersecurity? Do they have a team to monitor their infrastructure? Do they have a response plan for potential attacks and breaches? Ensure your due diligence includes a comprehensive cybersecurity analysis as well as a continuous risk monitoring program.

Governance and Compliance Risk: The actions of your third parties often have a bearing on your reputation. Typically, publicly listed companies have greater compliance requirements. Any act of non-compliance must be carefully evaluated. Ensure that the BPO vendor you choose has a history of compliance to local and international regulations.

Operational Risk: BPOs often act as the extended arm of enterprises. Their ability to be operational and deliver services within cost is critical. Assess the location in which the vendor operates on a number of parameters – talent pool, currency fluctuations, labor costs, productivity, geo-political stability, etc. Ensure you continuously monitor the location and the vendor to proactively identify risks to your operations.

Having a continuous risk monitoring solution in place ensures you can mitigate risks of disruption from your BPO operations. For more intelligence about risks from key outsourcing destinations and your top BPO vendors, explore Supply Wisdom.

Request a free demo to see how Supply Wisdom’s real-time risk intelligence enables Fortune 1000 companies stay up-to-date and proactively manage risks across their global operating locations and third parties.