Complex Risk Issues To Consider

Business rationale being key to your decisions regarding outsourcing does not preclude a close examination of your associated risks.

Outsourcing as separation of risk: For many Massachusetts small and mid-sized manufacturers, there exists a single business site for all operations. Fire or storm damage at your location means an inevitable interruption of operations with associated loss of revenue and possibly customers. Outsourcing parts of the manufacturing or support operations suggests the possibility of more rapid recovery in the event of a disaster. Analysis and planning along those lines is an important part of the outsourcing decision process.

Outsourcing as loss of control: Included in your business decision checklist should be the physical viability of the outsourced operations. If your key component, tool, or mold is housed away from your site, what are the exposures to a loss resulting in a long rebuild time? Not only the integrity of your propriety design, but also the safety and security of your property need to be considered. Be sure that either your outsourcer or you have insured your capital equipment and inventory at the outsourced site.

Risk review: A narrow set of core competencies done with exceptional precision makes for a competitive product or service. Innovation of design is also key in generating and maintaining market share. Months of restoration can leave a fast-paced industry leader trailing as competition rages forward. Careful analysis and understanding of your and your outsourced partners’ risks and recovery framework are key to maintaining viability and corporate health.