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October 15, 2012

New Report Highlights Risks of Global Business Process Outsourcing

By Tracey E. Schelmetic, TMCnet Contributor

While many companies are finding cost savings in business process outsourcing – indeed, the growth of the global BPO industry attests to this – many industry experts have taken to discussing the risks and urging companies to examine them before making an outsourcing decision.

While the earliest BPO operations largely focused on low-end work -- data entry and document management – the industry has now evolved to handle complex financial processing, high level IT work and customer service functions such as call centers and help desks. The higher level the work, the more sensitive the information, and the bigger the risk, say experts.

A new report by from global insurance broker Lockton and global insurance carrier AIG, called "Claim Trends and Best Practices for Reducing Professional Liability and Data Protection Risks”, highlights some of the most important issues when it comes to business process outsourcing.

"The shift of the legal battlefield to the contractual agreements between the parties has had a major impact on what traditional technology or miscellaneous professional liability exposures need to be insured for today's BPO/ITO company," wrote the reports’ authors, Emily Freeman of Lockton and Robert Ballerini of AIG.

 "The contractual battle between allocation of risk between service providers and clients has sharpened. Essentially, much more risk is being driven to the service provider," putting BPO and IT outsourcing companies at greater risk.

"This fact is apparent in professional liability claims history as well as our broker experience in reviewing draft contracts and RFPs,” write Lockton and Ballerini.

 “This is particularly true when the client is in a 'high-compliance' industry, such as financial services, healthcare, energy or telecommunications. It is also true when the client is a governmental entity (under considerable budget pressure and subject to political/public fallout for failed IT projects.”

The report’s authors say companies that will be successful with global BPO will be those that pinpoint the risks, reduce their exposure, and deliver on expectations to both their shareholders and clients.




Edited by Brooke Neuman
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