Outsourcing Risk Research Articles

Эффективность управления рисками аутсорсинга

Outsourcing is widely included in the practice of Russian companies, but a certain negative attitude towards such technology has not yet been overcome. Shareholders and management have a poor command of methodology of outsourcing, not fully take into account the risks of outsourcing, Weakly investigated the effectiveness of the outsourcing process: a well-known evaluation methods based traditional benefits, such as lowering costs and improving the quality of products or services, optimizing the number of staff. Often the methods of evaluation of effectiveness include additional indicators, reflecting industry-specific organizations. Such indicators include the reduction of logistics costs, reducing the cost of maintenance of warehouses, reduction in seasonal staff. The traditional criteria of efficiency of outsourcing is simple in definition, but have several serious short comings that limit their use. Universal and understandable for investors method of assessing effectiveness is a calculation of the comparative effect of outsourcing, assessing its feasibility, in terms of the impact on the financial results of the company (via FCF), capital structure (WACC) and the value of the company.

Research on the Risk of Human Resource Management Outsourcing for First-class Hotel --- A Case of InterContinental Shenzhen

Hotel is a labor-intensive service industry, whose core competitiveness lies in the human resource. To establish cooperative relationship by entrusted agency model way is an inevitable choice which can reduce the workload and obtain more information and professional service. Nowadays, the internal and external environment is changing dramatically and the outsourcing market and related regulations are inadequate. The enterprises need to identify and control multiple risks during outsourcing process, and try to avoid threatening uncertainty for business development. In this study, firstly, literature review summarized the risks in the whole outsourcing process. Then the paper studied the case of InterContinental Shenzhen, analyzed current situation situations and problems of First-class Hotel's human resource management outsourcing, evaluated the risk factors by probability and impact comprehensively, rating the final data by risk matrix. Finally, this paper proposed the management strategies against the relatively serious risk factors. It aims to improve the consciousness of outsourcing risks by research and analysis, to provide valuable references for managers to identify the key risk and re-assign resources, to create sustainable competitive and to innovate and improve the mode of human resource management.

Private Governance in the Supply Chain

Although there has always been risk in business, information availability, globalization, outsourcing, and electronic commerce have fundamentally changed how and where business takes place. These developments have led to more formal approaches for managing the entire enterprise, including those dedicated to understanding vulnerabilities and mitigating risks in the supply chain. Today, legal compliance, contractual compliance, and associated risk management systems are required, but insufficient, for the satisfactory performance of individual suppliers and the entire supply chain. This article describes noneconomic interdependencies in the supply chain and advocates for the role of social responsibility and private governance approaches for managing reputation. Through an analysis of supplier codes of conduct we examine marketing in practice and suggest future research opportunities.

A Sustainable Outsourcing Strategy Regarding Cost, Capacity Flexibility, and Risk in a Textile Supply Chain

The textile industry achieves economic benefits through outsourcing to low cost markets. Today, reshoring is an emerging trend due to rising cost and unemployment concerns. This problem is primarily due to an industry-wide focus on economic benefits only. Cost saving is a basic reason for international outsourcing while domestic outsourcing provides capacity flexibility. Moreover, outsourcing risk has a major impact on strategic location of the production destinations. Therefore, the merging of capacity flexibility and outsourcing risk comprises a sustainable outsourcing strategy. This paper suggests a sustainable outsourcing strategy in which a textile manufacturer outsources to international markets for cost savings and outsources to the domestic market for capacity flexibility. The manufacturer reserves some capacity with domestic suppliers, and pays a unit penalty cost if this capacity flexibility is not utilized. The manufacturer seeks minimum risk in international markets. Operational cost, penalty cost, and outsourcing risk are considered to be objective functions. Decisions include the assignment of contracts to suitable facilities, the quantity of each contract, and allocation of reserved capacity flexibility among domestic suppliers. Multi-objective problem of this research was solved using three variants of goal programming. Several insights are proposed for outsourcing decision making in the current global environment.

Economic View and Strategic Management View toward Understanding Outsourcing in Amateur Sport

Outsourcing as a strategic business decision has been a prevalent business practice in sport industry, and as a result has been receiving increasing academic attention by scholars in sport management. In many cases, the academic attention has been focused on multi-billion dollar hyper-commercialized sport industry, like professional and intercollegiate sport in the U.S. However, outsourcing has infiltrated the world of amateur sport, for instance youth sports programs (YSP), too. In spite of a growing use of outsourcing as a viable business strategy within a community based sport setting, efforts to understand outsourcing in amateur sport has so far gone unheeded in academia. Accordingly, this study examined outsourcing YSP by city- owned recreation centers (CORC). The motivation of outsourcing and the risk of outsourcing were analyzed using a multiple case study approach. The results of this study argue that combination of both economic and strategic management views are effective ways to understand outsourcing strategies in an amateur sport setting. The findings of this study provide both theoretical and practical implications. Furthermore, to contribute to the body of literature, the findings of this study are compared with previous sport management outsourcing literature to provide a comprehensive understanding of outsourcing.

Differences between Clients’ and Vendors’ Perceptions of IT Outsourcing Risks: Project Partnering as the Mitigation Approach

Information technology (IT) outsourcing has been a business practice for more than two decades. Researchers have suggested successful risk management as a key factor in successful IT outsourcing projects implementation. The documented investigations, however, have mainly addressed risk management only from a single perspective of either clients or IT vendors. Considering only one perspective allows for an omission of possible risks considered critical by the other party, as suggested by agency theory. This study explored the potential perception inconsistency regarding the risks between the client and the vendor for IT outsourcing projects by using a quasi- Delphi approach. The analysis results indicated some inconsistencies in the risks perceived by the two parties: (1) the clients regarded (a) lack of vendor commitment to the project and (b) poor vendor selection criteria and process as top critical risks but the vendors didn't; and (2) on the other hand, the vendors perceived (a) unclear requirements and (b) lack of experience and expertise with project activities as significant risks but the clients didn't. Insights into how the client and the vendor perceive risks may help both parties determine how to partner and manage project risks collaboratively to succeed in outsourcing.

A Study on the Risk of Small and Medium Enterprises Financial Outsourcing in China

The domestic enterprises began to face fiercer competition, which under the rapid development in the global economy today and the market increasingly competitive. During the government work report of 2015, Prime Minister Li Keqiang first proposed that encouraging people to start their own business and to make innovations, so that can be a new engine of economic development under the China’s New Normal. The leader of the economic reform is the micro, small and medium enterprises. In addition to the support of policy from the government for SMEs in financing, the SMEs should try to reduce the cost of capital by business management. The SMEs also need to create unique core competitiveness, in order to gain a foothold in the ever-changing global market. Outsourcing as one of the important means to reduce operating costs, has been adopted by more and more enterprises. As an auxiliary function of enterprise, financial outsourcing is beneficial to reduce the management cost and improve the efficiency of management. It can also help SMEs focus on the core competitiveness of ascension. When SMEs enjoy the benefits of such financial outsourcing, they are also associated with the risk of outsourcing. If the enterprise does not have a clear understanding and effective management with the outsourcing risk, it will lead to the enterprise cannot reach the purpose of outsourcing, also called the failure of outsourcing activities. Therefore, while the SMEs choose financial outsourcing, they must have the analysis and evaluation system of outsourcing risk. In this paper, based on the above analysis of the background, we study the risk of SMEs financial outsourcing. And after introducing the content and the status quo of financial outsourcing, we discuss the financial risk when the enterprise using financial outsourcing, and classify the risk, then measure the risk response, which in order to offer the decision-making basis for the successful implementation of financial outsourcing activities.

Evaluating outsourcing risks in the pharmaceutical supply chain: Case of a multi-criteria combined fuzzy AHP-PROMETHEE approach

Abstract: Pharmaceutical companies are undergoing major changes to cope with the new challenges of the modern economy. Indeed, the pharmaceutical industry faces relentless change and fluctuating demand which creates immense challenges in anticipating best sellers and predicting volume. The shortening of patent life periods, generic competition and public health policies, among other factors, have changed the operating context of the pharmaceutical industry. To focus on their core competencies, more organizations are investigating the feasibility of outsourcing logistics to improve the performance of their supply chain. In order to cope with various risks and uncertainty in the pharmaceutical supply chain, this study aims to propose an innovative approach for risk assessment in order to measure the level of risks related to outsourcing logistics. The paper highlights the risks faced in this context and also identifies the critical points in each section of the supply. Fuzzy AHP and PROMETHEE are combined to evaluate risks and assign them to predefined categories. The quality and efficiency of the proposed method are confirmed through an application to the supply chain of pharmaceuticals.

Significant risk factors associated with facilities management (FM) outsourcing

Purpose – The purpose of this paper is to extend the body of knowledge on healthcare facilities management (FM) by investigating the risks associated with outsourcing of FM services in hospitals. Design/methodology/approach – The paper relied on two strands of methodology common with pragmatic research. Questionnaire survey (QS) used data from 208 respondents representing ten hospitals while three out of the ten hospitals involved in the QS were selected based on their willingness to enter the case study (CS) interview. Data collected were analysed using descriptive and inferential statistics for QS and using narrative techniques by discussing themes, sub-themes for the CS. Findings – Findings established 24 out of the 35 risk factors as critical, four factors as somehow critical, and five factors as not critical. Besides, nine risk factors were found to be significantly loaded on the five risk categories. The rank analysis also revealed that the top five critical risk factors are: inexperience and lack of requisite skills; possibility of fraud by vendor; financial failure of chosen vendor; vendor opportunism; and fall in morale of employees. Originality/value – The study provides an unambiguous contribution to exiting body of knowledge on outsourcing risks as it relates to healthcare FM. It reinforces the theory that risks exist in any form of relationship but developed a distinct body of factors associated with outsourcing of FM services particularly from the context of Nigeria’s public healthcare sector.

Airosonic Travels Private Limited: staying competitive through IT development

Subject area Information technology (IT) project risks. Study level/applicability This case is suitable for the students who are enrolled in masters or executive programmes in management. Considering the masters programme in management, the case can be introduced in the MIS course in sessions related to IT project risks. The case will also be appropriate for discussion in elective courses, such as IT project management. Here the case can be introduced in discussions related to understanding IT project outsourcing risks. The case will also fit well with the audience of the executive programme in sessions on IT project risks. The assignment questions provided below are designed from the perspective of teaching this case to a business student audience. The case could certainly be adjusted to fit the needs of students in more technical disciplines. Case overview This case presents an organization (Airosonic Travels Private Limited) which was set up in 1988. The organization provided travel-related services (i.e. ticketing, hotels bookings, car rentals and cruises to exotic destinations) to meet the requirements of corporate users such as organization employees, vendors, dealers and customers. The packages were provided though the portal www.corporatetravels.in/. With cut-throat completion from other vendors, the organization acquired the globally preferred airline reservation system Galileo to gain market share in the computer reservation system market. This acquisition, however, led to a series of deliberations on how the new system could be put to use and integrated with the portal so that it helped Airosonic to achieve efficiency in its day-to-day processes. The integration was necessary, as this would entirely eliminate third-party requirements (such as travel agents) and also make travel planning easy, cost-effective and hassle-free. The different alternatives available to the governing body were to develop and manage the entire thing in-house, outsource the development to a third part, or delegate the entire responsibility to the third party. The analysis of the case takes into account the different risks that are associated with each of these decision alternatives and the possible ways forward for the Airosonic management. Expected learning outcomes The objective of this teaching case is as follows: to understand the different risk elements that influence development of a software initiative, to differentiate between different categories of risks including project development risks and project management risks, to appreciate the differences in the types of risks that influence different project execution scenarios such as in-house development and outsourcing and to understand how an organization can address and manage the risks facing a software initiative. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

Managing the risks of outsourcing: Time, quality and correlated costs

Cost, quality and time to market are three main factors for outsourcing management. A game theoretic model is used to design optimal outsourcing contracts including these three factors for a buyer and a supplier under Full Information (F) case and Asymmetric Information (A) case where the buyer does not share her internal variable cost information with the supplier. Optimal outsourcing contracts are derived and results of numerical experiment are also presented. Several insights of managing the outsourcing risks due to the Asymmetric Information are given for various industries, like cost-sensitive industry, time-sensitive industry, and quality-sensitive industry.

Razones y riesgos del outsourcing de sistemas de información en las grandes empresas españolas

Information Systems Outsourcing is a common practice in companies with unstoppable growth. It is therefore essential to know in depth what are the reasons that lead companies to outsource and what the major risks are inherent in this practice. This paper makes a proposal for these reasons and risks and it assesses them in the case of the major Spanish companies through a survey that was replicated twice. The longitudinal analysis allows to draw trends and to assess continuity and change in the reasons and risks of outsourcing. Although the reasons are fairly stable the risks have changed, in terms of their valuation trend in recent years. In any case the proposed reasons and risks should be taken into account by management, prior to any outsourcing decision.

A Novel Dynamic Algorithm for IT Outsourcing Risk Assessment Based on Transaction Cost Theory

With the great risk exposed in IT outsourcing, how to assess IT outsourcing risk becomes a critical issue. However, most of approaches to date need to further adapt to the particular complexity of IT outsourcing risk for either falling short in subjective bias, inaccuracy, or efficiency. This paper proposes a dynamic algorithm of risk assessment. It initially forwards extended three layers (risk factors, risks, and risk consequences) of transferring mechanism based on transaction cost theory (TCT) as the framework of risk analysis, which bridges the interconnection of components in three layers with preset transferring probability and impact. Then, it establishes an equation group between risk factors and risk consequences, which assures the “attribution” more precisely to track the specific sources that lead to certain loss. Namely, in each phase of the outsourcing lifecycle, both the likelihood and the loss of each risk factor and those of each risk are acquired through solving equation group with real data of risk consequences collected. In this “reverse” way, risk assessment becomes a responsive and interactive process with real data instead of subjective estimation, which improves the accuracy and alleviates bias in risk assessment. The numerical case proves the effectiveness of the algorithm compared with the approach forwarded by other references.

Quantifying the Risk of Intellectual Property Loss in Analytics Outsourcing

The safety of a company's secrets and proprietary competitive practices becomes an important concern when the company is involved in outsourcing. This concern becomes even more critical when the company is engaged in analytics outsourcing where the company shares proprietary data about the internal processes. While there is a growing concern about the larger costs and risks of the wholesale outsourcing of analytics functions in the business press, there are no statistics on the risks or a sense of how big they might be. This paper attempts to fill this gap by building a mathematical model of the vendor-client interaction that will allow some baseline quantification of the risks that are inherent in analytics outsourcing. The paper also discusses the implications of these ideas for companies that work with outsourcing vendors and closes with some ideas for further research.

A Case Study Using the Analytic Hierarchy Process for IT Outsourcing Decision Making

Decisions related to managing IT resources - which resources to keep in-house and which resources to outsource - are critical to business success. The goal of this paper is to show the usefulness of the Analytic Hierarchy Process (AHP) as a decision-making tool for IT sourcing decisions, based on an analysis of factors that recent literature found to be associated with IT sourcing risk. Although the AHP previously has been suggested for IT outsourcing decision making, this study is the first to consider evaluating the risks of offshore outsourcing, rural outsourcing, and in-sourcing IT processes by using the AHP. From the perspective of the expert decision maker, three IT sourcing strategies were evaluated with respect to 58 criteria. The case study example presented in this paper shows the effectiveness of the AHP to support management for this business decision. The authors' results show that a systematic approach to analyzing outsourcing can reduce the uncertainty and risk that is common in such decisions.

Risiko Pembangunan Sistem Secara Penyumberluaran : Pengujian Menggunakan Teknik Proses Analisis Berhirarki

System development outsourcing has become the important practices in many organizations which involve third parties contribution on IT implementation as well as software development. The reasons of the demanding in outsourcing implementation are because it reduces operation and development budget for Information Technology Department and improves service quality and operational efficiency. Although it comes with benefits to the organization, but there are risks that associated with it. The objectives of this study are: 1) to identify main risks in outsource software development, 2) to assess the outsourcing risks and 3) to test the risks related to supplier using AHP technique. A survey was conducted in Malaysia to identify main risks in software outsourcing and to access the risk’s level and severity. Then, the risks were analysed using Analytic Hierarchy Process (AHP) technique to evaluate the performance of the suppliers in outsourcing data collected in the organisation. In this study, the testing and evaluating method were carried out with the officers in The Rubber Industry Smallholders Development Authority or RISDA in Malaysia because this organization has experience in software developemt outsource for more than 15 years. They are considered as well experience and good knowledge in this area. Findings from this study suggest to the related organization the main risks identified during software development and risk analysis is used to manage risk effectively according to its severity and priority. One way to manage and control risk is by identifying risks associated with suppliers using multi criteria selection method.

Does Decision Changes—A Case Discussion on e-Governance Outsourcing: A Fuzzy Analysis Approach

In the present competitive environment, outsourcing is not only a buzz word, it is an alternative for survival for organizations. Specifically, outsourcing of information technology services is common due to some obvious reasons. However, the decision to outsource differs from decision maker to decision maker as risk and return of outsourcing varies with decision maker’s attitude towards risk taking and their initiative. As the attitude of the decision maker towards the risk consequence plays an important role in decision making, measuring this parameter is a concern as it involves multi-criteria problem with a linguistic nature of the risk attitude resulting in a fuzzy situation. In this article, an attempt has been made to relate sustainability in decision with respect to information technology outsourcing, with a focus on attitude and decision making using a detailed case study of e-governance project in a university using AHP and fuzzy AHP.

ISM Approach to Model Offshore Outsourcing Risks

In an effort to achieve a competitive advantage via cost reductions and improved market responsiveness, organizations are increasingly employing offshore outsourcing as a major component of their supply chain strategies. But as evident from literature number of risks such as Political risk, Risk due to cultural differences, Compliance and regulatory risk, Opportunistic risk and Organization structural risk, which adversely affect the performance of offshore outsourcing in a supply chain network. This also leads to dissatisfaction among different stake holders. The main objective of this paper is to identify and understand the mutual interaction among various risks which affect the performance of offshore outsourcing. To this effect, authors have identified various risks through extant review of literature. From this information, an integrated model using interpretive structural modelling (ISM) for risks affecting offshore outsourcing is developed and the structural relationships between these risks are modeled. Further, MICMAC analysis is done to analyze the driving power and dependency of risks which shall be helpful to managers to identify and classify important criterions and to reveal the direct and indirect effects of each criterion on offshore outsourcing. Results show that political risk and risk due to cultural differences are act as strong drivers.

Outsourcing Risk Avoidance

The researcher examines the Information Technology (IT) outsourcing risk avoidance tolerance of managers by measuring the effect on organizational performance. IT outsourcing risk avoidance factors were partitioned by the value of long-term versus short-term and high-value versus low-value contracts. The sample was obtained from the financial archival data of 79 firms during the period of 1986 to 2009. The risk-avoidance effect was evaluated in terms of financial metrics. Cost efficiency, productivity, profitability, growth, cash management, and market ratio were calculated to measure each company's performance. Organizational performance was the dependent variable, which was measured by comparing fluctuations of the stock's market value. The findings indicate that manufacturing firm performance was better with short-term and low-value contracts. However, the results are mixed for service firms. In manufacturing firms, the market reacted positively when managers announced long-term and high-value outsourcing contracts to avoid IT risks. By contrast, the market reacted positively when low-value and long-term outsourcing contracts were selected by service firm types in the sample.

Outsourcing the Information System: Determinants, Risks, and Implications for Management Control Systems

ABSTRACTOrganizations are outsourcing traditional functions that have financial reporting implications, such as transaction processing and valuation assessments, with increasing frequency. This practice of outsourcing aspects of the information system transforms the control structure of the outsourcing company and creates new challenges for management and accountants that are not explicitly addressed by current research. In this paper we synthesize academic literature and regulatory guidance on using third parties to perform functions with financial reporting implications (i.e., service organizations) and identify specific opportunities for future accounting research. To provide structure to our review and highlight knowledge gaps, we develop an organizing framework that links existing theories of outsourcing determinants to outsourcing risks and identifies the advantages and limitations of certain control mechanisms to mitigate such risks. Very little academic research exists on the use of service organizations, despite the rapid growth of this practice and regulators' concerns that financial reporting quality may suffer due to inappropriate management oversight and audit deficiencies. We provide insights for future research on (1) factors influencing companies' decisions to outsource the information system, (2) risks that arise when companies outsource the information system, and (3) implications for management control systems.