Wednesday, November 11, 2009

ERM-BC-COOP: Off-shoring threats

Carl G. Fsadni, Senior Manager at Cognizant Technology Solutions - Infrastructure Practice, writing on the LinkedIn group Business Continuity/Disaster Recovery Network brings an interesting threat to organizations that sent work off shore.

While Fsadni's comments focus on India, they apply equally to other locations (e.g., the Philippines, Malaysia).

He asks: Is India a soft-target for Taliban terrorists?

His concerns are very real even before the Taliban becomes a nuclear threat, and that is only a matter of time (given Pakistan's nuclear capability, Russian hardware availability, and Iran's and North Korea's development efforts).

The Taliban is just one of many groups - some Islamist, some not, but all with the potential to create mutually beneficial short or long-term working arrangements - scattered around the globe.

In the rush to save a buck, corporate executives sent off-shore as many "first world" jobs as possible. Some jobs went to neighboring states (e.g., auto manufacturing from the US to Mexico), some went to distant continents (e.g., call centers and software coding to Asia).

As the jobs went out of the country, the demand for skilled people to do the jobs diminished and two things happened:

    1) People with skills no longer in demand at home lost their leading edge knowledge and looked elsewhere to survive, and

    2) Prospective additions to the field that was outsourced look to other fields, assuring that if the work ever is brought back, there will be no locals capable of doing the work

While this is happening, schools - trade and university - are having to re-think their offerings, and the government is having to get new rubber stamps for visa requests from the folks elsewhere who will flood the local market (there being few if any locals still retaining equal skills to do the job).

The desire to "save a buck" (or pound or mark or . . . ) may turn out to be short-sighted if something happens to the off-shore operation and the operation can no long be restored in the home, "first world," country.

The Enterprise Risk Management (ERM) perspective is that off-shoring is a risk that, as with other risks, must be considered, prioritized, avoided or mitigated, and a response prepared.

As with all ERM programs, the risks (and responses) must be continually reviewed; in this case, changes to the threat to the vendor (internal or external) and the ripple effect to the "home country" operation must be updated on a frequent basis. How this review is accomplished is another matter for another time.

Just as most organizations failed to consider a financial vendor failure, many fail to see the increasing probability that an off-shore vendor's operations will be disrupted.

From my point-of-view, the time has come to re-think the list of risks facing an organization; we must broaden the view and be all-inclusive; bottom line, it's time to throw away the box and to play the "what if" game sans limitations.

John Glenn, MBCI C Enterprise Risk Management
Hollywood/Fort Lauderdale Florida
JohnGlennMBCI at gmail dot com

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