What are Some Outsourcing Risks?

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  • Last Modified Date: 07 November 2019
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Much can and has been said about the benefits of outsourcing. Primarily, it may save a company a great deal of money, creating better profits for shareholders and allowing a company to focus on a few key areas. There is also a considerable amount written on outsourcing risks, and companies are duly advised to consider these carefully prior to demolishing departments and allowing other businesses to take over the work of them. Some outsourcing risks that could be considered include cultural/language problems, poor interaction with other regions, information security, initial investment in transferring information, loss of control, and effect of outsourcing on the primary country in which the company does business.

Often, outsourcing means offshore outsourcing, and one of the issues with this practice is the degree to which cultural misunderstandings or language problems may impact work or service to customers. Even when another country has many speakers of the company’s native area, there can be problems that arise from differences in culture, and this could halt workflow, or it could create a poor impression of a business’ customer service department. In fact, there are some companies who initially outsourced things like customer service lines and have since found that one of the great outsourcing risks is consumer dissatisfaction with this practice due to language barriers or cultural issues. To this end, some companies returned such work to native countries, and if they outsourced it, they did so to speakers more likely to understand callers.


Offshore outsourcing risks include those associated with running a business in a country that has different laws or an unstable government. Many prime outsourcing locations are not in the most stable of governments, and great money loss could be accrued if political situations worsened. Sudden changes in leaders could prove a problem too, and coups might end with the outsourcing company being owned by a new country leader. A lower level of maintenance, particularly in third world countries, might mean unexpected shut-downs, as from natural disasters, that cannot be immediately attended to by municipal or other government.

An aspect that is of great importance when assessing outsourcing risks is the security of many different types of information, including proprietary knowledge or things like personal statistics and tracking on employees or customers. Given that the main company may seldom micromanage operations in the outsourced area, the degree to which information can leak isn’t always known. There have been instances of thefts of things like credit cards, social security numbers and patented material, and these must give a company pause.

While outsourcing frequently saves money, initial investment can be very expensive. Employees may have to travel to the outsourced location to set up operations, train workers, and others. Sometimes this transition is seamless, but other times it is marked by many bumps in the road or continued challenges in operating outsourced work in an efficient manner.

This loss of control is a matter requiring thought too. In some cases, another company becomes the de facto representative of the main company and it may not have the same ethics and goals. Degree of control kept often depends on whether the company contracts with another one or whether it runs the outsourced company. In the latter case, less control over outcome is expected, though companies can always fire the present outsourcer and hire another one. This will take time and money.

Companies and their employees are members of the country in which they work. One of the outsourcing risks that needs to be considered is the gradual impact of this practice on the world in which the company and employees inhabit. Outsourcing has contributed to significant job loss in certain fields, and this creates problems in numerous ways. It can keep a skilled group of workers out of work, ultimately diminishing that skill group to the point where it might be hard not to outsource. Higher unemployment may also be traced to greater public need, and this could raise taxes on individuals and companies, especially those who have in part created the need.

It’s unlikely that companies will view outsourcing risks as reasons to avoid it. As mentioned, many industries now routinely practice this to some degree because they find it saves money. Yet it’s important to point out that it is not always easy or successful, and saving money might ultimately end up costing more money in taxes.


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