IT News

The allegations of fraud in Satyam India are a painful reminder that companies must better understand the risks of outsourcing.

This was the main message from Navin Pasricha, Chairman of Columbus Circle Governance, at a briefing session for a specially arranged workshop on the risk, control and audit of outsourced services. “A number of Malaysian companies have the attitude that if they are outsourcing a core business process such as IT or a call centre, then they are somehow immune to the risks involved. The reality is that outsourcing is only a commercial arrangement. Not only do the risks remain yours, in fact there are a lot more risks added on.” Chief among the additional risks according to Pasricha, are corporate governance risk, as with Satyam, and “the risk that if your outsourcing provider goes under or cannot deliver for whatever reason, then you must have a backup strategy.”

“Risk assessments at present, tend to concentrate on operational issues and service level agreements when things are progressing well. This includes the ability of the outsourcer to deliver during normal times and their disaster recovery plans and so forth. These are all important, however, it is clear from the Satyam case that companies must also consider the bigger strategic risks of outsourcing and the issues of dependency upon a service provider.” Pasricha said that outsourcing arrangements should be subjected to the same kind of scrutiny and due diligence of corporate governance standards as a joint venture or formal alliance. “ The specially arranged workshop on the “Risk, Control & Audit of Outsourced Services,” is being organised by ST Global Soft Technologies.

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