Why outsourcing arrangements requires a dedicated solution

Outsourcing of services brings several benefits to a business, but also extensive commitments. In order to ensure smooth handling as well as a good overview and control of your outsourcing arrangements, a solution tailored for this can be required. The risks are otherwise non-compliance with regulations, increased business risks and unnecessary administration.

The differences between an outsourcing arrangement and a contract

Before discussing why it is important to understand that managing outsourcing arrangements is more than handling a let us briefly define “arrangement” and “contract” and how they relate to each other. The contract forms a part of what constitutes the outsourcing arrangement. It is the formal agreement on future measures and describes the terms of the outsourced service. The arrangement, on the other hand, includes the full set of documents and actions covered by the contract, e.g. risk assessments, due diligence, controls, pre-analysis, exit strategies etc.

Managing outsourcing arrangements is about risk management, not only about contract management

It is the outsourcing party that is responsible for the services provided under the arrangements, and great demands are placed on how the outsourcing arrangements and all the parts are handled throughout the life cycle. It can have a huge impact on the business. It is primarily about risk management and compliance, but also about resource utilization and administrative costs. And the more outsourcing arrangements that exists, the more complex it becomes.

The risks can be divided into several areas that has to be managed – operations and security, reputation, compliance and financeCustomers and the financial infrastructure must be protected while ensuring accessibility and functionality. This, in turn, affects how the company is perceived by its stakeholders. Maintaining strong confidence and good reputation is crucial to the willingness to do business with the company in question. Finally, failure to comply with current regulations can lead to various actions by the responsible authorities, from requirements to take action, to fines and even revocation of licenses.

Although the management of outsourcing arrangements is largely about risk management, the way they are managed can also lead to significant administrative benefits. Overview, control and efficient work processes reduce the workload and thus reduce the cost of managing the arrangements while freeing up the capacity for other tasks. In addition, efficient and transparent handling further contributes to strengthening compliance.

Four things worth considering when choosing a solution to manage outsourcing arrangements

Outsourcing arrangements must be managed actively and continuously. A dedicated solution developed to support managing outsourcing arrangements can contribute to the overview and control you need while reducing administration. The following parameters should be considered evaluating the proper solution:

  • Lifecycle management of the whole arrangement must be supported. The conditions for the outsourced service might change over time, and therefore it is crucial to be able to manage the contract and the other parts of the arrangements throughout all phases in the lifecycle.
  • The solution should be able to handle both outsourcing arrangements and service provider contracts, but the starting point for the solution should be the outsourcing arrangements and the requirements for handling these.
  • Access to expertise including both user support and subject. This helps you not only to use the solution optimally, but also to an improved outsourcing management
  • User friendliness. The solution should be easy to work with, simplifying work while contributing to stronger compliance.

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