Risks

George Kimball and Mark W. Heaphy

Chapter 2 in Outsourcing Agreements, 2025, pp 15-29 from Edward Elgar Publishing

Abstract: Outsourcing agreements, like other contracts, allocate risks; and most of the parties’ concerns are related – even mirror images. Where customers may be reluctant to cede control of operations, suppliers desire autonomy. Complex transitions to outsourced operations require collaboration. Common concerns include financial risks (charges to customers, suppliers’ costs to perform), change management, regulatory compliance (especially data protection and privacy), employment laws as they apply to displaced and transferred employees, security incidents, and a variety of ‘worst case’ or extraordinary risks, including force majeure conditions and events. Reflexive, strong-armed risk-shifting can misalign contractual and operational incentives, undermining the transparency and collaboration required for success. Instead, to contain and mitigate risks, the parties must ask themselves hard questions about: (a) the readiness of the customer's business and the supplier's proposed solution; (b) the alignment of such deal elements as the customer's requirements, the supplier's proposed solution, both sides’ financial models, and (c) practical as well as contractual measures to mitigate and manage risks.

Keywords: Outsourcing; Business Process Outsourcing; BPO; Information Technology Outsourcing; ITO; Risk allocation; Risk management; Risk shifting; Change control; Change management (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035316984
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