Why do companies outsource?
- To cut cost and transfer risk.
- Required by law (e.g. insurance vs. self-insurance)
- Don’t have the resources.
- Temporary assignment (e.g. project, seasonal work, etc.)
- To keep a sustainable growth without adding extra capital
- Don’t want to manage it.
What is Outsourcing?
Outsourcing is the process by which a company transfers an activity (or a group of activities) to another company. Because all business activities have a component of cost and risk built in, the ultimate outsourcer’s goal is to reduce overall cost and risk -at the same time.
In today’s world of globalization and specialization, outsourcing is critical for every organization to stay in business. The key to successful outsourcing lies in knowing that even though the outsourced activities do not need to be managed, the risks attached to them do.
INSIGHT’s responsibility is to help its clients identify the new risk the company is acquiring when outsourcing its risk manager and recommend ways to reduce it to acceptable levels.
INSIGHT approach to outsourcing
INSIGHT’s ultimate goal is to have the vendor signing our client’s contract and complying with its insurance requirements before a purchase order is issued. If the outsourcing activity requires that our client signs the vendor’s contract (utilities companies, government, etc.), the On-Site Risk manager (ORM) will review the contract and produce a “Risk Alert” with its recommendations. If needed, the ORM will contact the client’s legal counsel.