Assessing Offshoring Risks: Thinking Through the Financial and Operational Issues

As the offshoring trend continues unabated, companies are increasingly shifting complex processes and operations offshore. But many of these same organizations fail to consider all the potential risks — and the substantial requirements — offshoring entails. Many offshoring efforts are plagued by delays, performance shortfalls, and lapses in customer service. Complicating the offshoring decision is the fact that much of the available data on offshoring is either insufficient (since it encompasses new trade flows that have never been tracked) or unreliable (the information comes from interested parties). Moreover, because of its many social, economic, and political ramifications, offshoring often generates negative press that reinforces unfavorable public perceptions. This makes it difficult to gain a balanced perspective, let alone proceed with a deliberative, dispassionate decision-making process.

Executives are thus left with few outlets for information sharing about the feasibility, let alone the ethicality, of pursuing offshoring. The Conference Board® Working Group on Assessing Offshoring Risks will provide leaders from organizations at all stages of offshoring operations with a much needed forum to discuss these and other important concerns. Drawing upon The Conference Board's extensive new research on offshoring, financial, operations, and sourcing executives, along with their counterparts in offshoring service delivery, will convene to explore the most critical financial and operational issues associated with developing a coherent, comprehensive, and failsafe offshoring strategy.

Issues On the Table

A vital part of this working group will be the opportunity to participate in candid and confidential discussions about the financial and operational issues facing companies that offshore or are thinking about doing so. Potential topics to be addressed include:

Costs, pricing and delivery models — If cutting costs substantially is the primary motivation for offshoring, how can companies ensure that all costs as accounted for? What baselines are they using? Which pricing models are most appropriate in various circumstances? How should organizations choose among service delivery models and third-party providers? How can they assess the value-added in the near and long term?
Management and governance — Does offshoring mesh with your organization's strategy? How should you organize and coordinate your offshoring effort? What's best for the early transitional stage versus the ongoing operational stages? How do you identify capability gaps and human capital needs onshore and offshore? What resources do you need to ensure sound governance?
Understanding and mitigating risk — From geopolitical, physical security, and infrastructure risks to threats to data security and intellectual property, which risks are most significant? How can the choice of location, partner, and systems mitigate risk? How do you balance risk, cost, and opportunity? How can enterprise risk management and scenario planning prepare you for contingency — or crisis?
Achieving and sustaining results — Why do so many offshoring projects fail to deliver hoped-for results? How can organizations get their projects back on track? In what ways can you boost the probability of success from the start?

Note: This Working Group is closed - Report Pending

Working Group Leader:
Ton Heijmen, ton.heijmen@conference-board.org, (212) 339-0224.