6.) Risk Management: If your business is launching a new product or offering something new, hiring employees offers little in terms of risk management should the product not do
well on the open market. With outsourced workers, operations can quickly be fine-tuned to meet a skyrocketing demand or a demand that never comes into fruition.
Your organization makes large investments in your operations and has to deal with a number of economic and political changes, which may prove risky for your businesses. By outsourcing, your company is able to reduce some of the associated risks because we also share in some of the costs. This reduces your cost burden. Periods of high employee turnover will add uncertainty and inconsistency to your operations. Outsourcing will provide a level of continuity to your company while reducing the risk that a substandard level of operation would bring to your company.
When certain functions are outsourced, you also distribute or do away with the risks associated with running that particular function. Another type of synergy that can cross corporate boundaries is the sharing of risk. In financial circles, this is called the “portfolio effect.” In investing, it’s best to diversify your portfolio rather than put all your money in one stock. By spreading your risk, you reduce your total risk. Why does diversification reduce risk? If the whole market goes down, you’ll lose, no matter what you do. But if the market goes up while one company makes some serious mistakes, the rest of your portfolio may still do well, and you are not as vulnerable as you would have been had you put all your money into a single stock.
In business investments, the same is generally true. Investing in new technology can be a risky proposition for businesses today. Rather than putting up its own funds, it may make more sense for your business to use outsourcing to ensure that the technology available to you is always up to date and relevant to your needs.
There are many good reasons for outsourcing, and today’s companies will likely continue to use this business strategy in the future.
Example: The human resource manager is on an extended medical leave and the two administrative assistants leave for new jobs in a very short period of time. Outsourcing the human resource function would reduce the risk and allow the company to keep operating. Also, if payroll management is eating up your operational time and money, outsourcing it
to a payroll services provider gives you the freedom to focus your concentration on other core activities of the business.
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