Top 3 Outsourcing Risks & How to Avoid Them


These days, outsourcing has become a common practice for both large corporations and small businesses alike. This is because it allows them access to skilled expertise and flexible staffing options at a more efficient cost, among other things. However, for all its benefits, it doesn’t come without its own risks, and like all business decisions, outsourcing has to be given some significant thought. That said, we’ve outlined three of the top risks that come with outsourcing so that you can make your decision carefully and choose the right company for you.

Hidden Costs

 Typically, businesses outsource in order to save on costs — but sometimes, hidden costs can quickly rack up an invoice that’s well over your budget. Your vendor could start adding additional overhead costs for changes or modifications that make sense at the moment but weren’t agreed upon during the initial negotiations, which could turn out to be a financial headache. These additions could add up to anywhere between 14% and 60% of your original agreed upon price, according to Supply Chain Quarterly in an article entitled ‘The 10 Hidden Costs of Outsourcing’. In order to avoid this, identify exactly what you need from your vendor and factor in future needs as well — if they are offering something new that could definitely help you in the long run, it wouldn’t hurt to take it. However, if you’re on a tight budget, make sure your contract has a full list of additional expenses you’re okay with or leaving some “wiggle room” in terms of changes or modifications with the plan.

Confidentiality of Intellectual Property

 When it comes to outsourcing anything, be it marketing, financial, or even janitorial services, your businesses’ data and intellectual property is at risk. To mitigate these risks, you should go for both external and internal protection. Internally, this should be easy, as Marcus recommends basic tips such as strengthening your account passwords, paying attention to your systems and changes, and even keeping software up to date. Externally, however, this is a little trickier. First off, it pays to be careful. Choose a company that has had projects with sensitive details in the past. Additionally, Young Entrepreneur Council points out that your desired outsourcing company should have four traits: quality, reliability, communication, and accountability — ask them if they’ve worked in your industry before, and look at their previous work. If you’re still unsure (and even if you are!), have them sign a Non-Disclosure Agreement (NDA).

Giving Control Over the Process

 What comes with outsourcing is taking a step back and trusting other people to get the job done for you. While nerve-wracking, this isn’t bad at all. In fact, our article on ‘Top Ten Benefits of Outsourcing CFO for Your Company’ highlights how outsourcing can give you a fresh new viewpoint for new and accurate problem-solving — so taking a step back may just be what you need. That said, start with having solid communication points, and set clear goals for them to reach. You can go the extra mile and even ask them to use requirement-tracking software so you can add and edit new goals or points as needed. Finally, establish reporting, be it daily, weekly, or even monthly, so that you can at least be kept in the loop regarding the progress of the project.

If by the end of this article you’ve decided to take the plunge and go with outsourcing – that’s great! Outsource your CFO today and get additional info from our team of experts here at DeepSky about what we can do to help you. We’re only a phone call away at (949) 200-6829.


Article written by Bethany Lewis

Exclusively for