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Risk mitigation and management in BPOs

Posted by Polash

The BPO industry may look like a good option for investment for both venture capitalists and angel investors. And in truth, it is indeed a viable long-term investment for those willing to go the extra mile. But as with any other industry, the BPO industry also comes with its own risks and uncertainties.

Companies and businesses, involved in the BPO services sector for a long time have devised their own ways and frameworks to mitigate both the obscure and the recurring type of risks. But a mere articulation of a risk management framework is not good enough. The incompetence for robust implementation of these frameworks may lead to circumstances that can destroy a brand’s hard-earned reputation and can jeopardize the very existence of the organization itself. Hence, it is in favor of the businesses to reduce the percentage of such risks as it is essential in bringing success to their outsourcing efforts.

Typically, the BPO pundits have consensually categorized the inherent risk factors into 3 identifiable categories. These are as follows:

Operational risks-

The operational risks are those that are involved with the malignant inconsistencies in quality, cost or efficiency in process execution.

Strategic risks-

These are concerns related to the intellectual property rights, security, and privacy of personal & classified data etc.

Composite risks-

Composite risks are long-term risks. For instance, the inability to execute a certain process in-house due to loss of talent and knowledge of the business process.

Among this triad of risks, the composite and the strategic risks are those that can be mitigated and moderated to an extent through the application of operational controls and contractual terms. Although, managing operational risks is an incessant exercise that needs to be performed on a continuous basis. Businesses offering various BPO services rely on a multitude of metrics to provide the requisite means to gauge, monitor, report and manage the operational parameters.

Different businesses have their own individual approaches to mitigate operational risks. Here, in this article, let us touch upon one of such approach or framework that can effectively curtail a company’s operational risks substantially.

Read Also: Planning to Acquire BPO Services? Points to Consider​

The Framework

The cost related, efficiency, and the qualitative aspects of an operational process depends upon a variety of factors. The most determining factors that dictate such a process are categorically classified under people, technology, and process.

People risks

The average employee turnover rate in the United States is estimated to be more than 30%, while in countries like India it is projected to be above 50%. Employee issues can play an extensive role in affecting the business conduct. Hence, the employee turnover rate is a major metric in determining the efficiency of an outsourced operational process. In addition, businesses engaged in inbound call center operations such as phone-based help desk support depends upon the number of call center agents present to handle incoming queries. This makes absenteeism an important key metric. Absenteeism can also adversely affect other metrics such the call attendance rate and the average waiting time for the contact centers. To curb this menace, management should employ tactics to ensure that a constant stream of new recruits is always being trained. In such a scenario, the metrics to evaluate the training process also becomes an important part.

Read Also: BPO Outsourcing: Guidelines for the First Timers​ 

Technology risks

A good management practice involves the reduction of technology-related issues. The integration of a company’s technical systems with that of the service provider is a major concern in this segment. There are many network and system related issues that can go wrong. For instance, many processes involve the scanning and data entry of paper documents into a digital entity that is manually recorded at an offshore or an onshore site. Unless a smooth and reliable computing infrastructure and an undisturbed communication are maintained, speedy execution can be a distant dream for such cases.

The key tech metrics that are influential here are network uptime, system uptime, and application uptime.

Process risks

Process risks are broadly divided into qualitative and quantitative risk. In customer involving processes, qualitative risks may deal with the issue of customer satisfaction. These are concerns where the BPO services availing client uses various survey metrics to evaluate the overall quality of the contact center performance.

The quantitative risks are further classified into efficiency and effectiveness risks. The efficiency risks are those that are involved with time such as average handle time and average wait time etc. While on the other hand effectiveness metrics are involved in gauging the outcome of processes dealing with inbound and outbound selling.

Process metrics are typically less in number but highly accurate and relevant to the concerned process.

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