Changes and reforms in the Governance and Compliance norms have made stringent requirements related to good internal governance and control, stand out in particular – place higher demands on both management and control functions of companies.

Managing risk efficiently and effectively can be a determining factor in the overall success of any organization. Most of the company tries to develop a risk management plan on their own and some outsource this function. Outsourcing risk management function is not a new concept globally, but the scenario is new for Indian organizations. However, contracting out risk does not guarantee an organization’s success at all but yes; there are greater chances of success. Reason being, the program is designed, developed, implemented and reviewed by risk management professionals and therefore, can improve the quality of your overall Enterprise level and Operational risks.

Outsourcing of risk function may or may not be necessary. There are several factors influencing this decision including

  • Nature of company’s business
  • Types of risk
  • Company’s current financial position
  • Compliance norms in the country &
  • In-house knowledge/ resource availability.
  • Outsourcing or contracting out non-core services may deliver good results and substantial benefits to the Company. In today’s world, any company can employ external resources and utilize their specialized services. Like any outsourcing of any other function the main benefits are:

    Reduced Cost: that it reduces your cost as well as saves your time,
    Focus on core: you no longer need to employ all your resources for managing non-core activities,
    Somebody else’s profit centre: in addition to this, these specialized services are delivered but experts who treat this as their core activity and operate them a profit centre, whereas for company it is cost centre.

    Even after considering all above advantages, outsourcing risk function is still a critical decision and need careful considerations and planning.

    Unbiased Opinion: Unbiased advice from experts is one of the most essential requirement to understand if you really need to develop an in-house risk management plan or you should look for external services.
    Sharing Confidential information: outsourcing of risk function could prove risky, as company needs to disclose the confidential information to the outsourcing firm so that they can better understand the current standing of your organization.
    Lack of control / monitoring: It may also bring undesired changes in your company. The company deciding to outsource risk function, need to keep a check on outsourcing partner via clearly defined Non-disclosure and SLA’s.
    So if you have read the above article, you can easily understand that there is a need to outsource the risk function to experts who can manage it better than in-house risk management function, but even after saying that there is need to outsource risk function, there is a greater need of clearly defined SLA & controlled environment for outsourcing the risk function.

    Authoor : Gaurav Shukla

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