Some factors generating operational risk External Factors – less controllable – Use of Consultants and Outsourcing Services, Disruptive Events
Consultants and Outsourcing Services
Outsourcing arrangements require careful management if they are to yield benefits and where they are not managed adequately the degree of operational risk faced by an organization may increase. As there is a trend to rely more heavily on consultants and the use of outsourcing services, there is a concern that the loss of control over processes may expose companies to more risk. A serious threat to operational continuity rises if these service providers do not follow standard operating and safety procedures fail. Companies must increase their monitoring of contractor activities to ensure that standard procedures are being followed to mitigate overall operational risk. An area of additional concern, is when your outsource service, outsources some of their own processes. How deep along the supply chain does your control and oversight go, before it is impossible to identify the suppliers of the part, product, or service that you are using? With counterfeit, contaminated and substandard parts and goods, being able to enter the supply chain at any point,
Such events include fire, flooding, earthquakes, tornados, terrorist attacks, power failures, etc. The organization should assess the potential risk for such events, design and put in place disaster recovery systems and procedures with a goal of responding quickly to mitigate any event that occurs and prevent the incident escalating. This also, enables them to also ensure the safety of personnel and surrounding community.
This posting is the eighteenth of a series of blogs discussing various factors of operational risk management as it pertains to manufacturing organizations. Please feel free to comment and discuss this series.
For those of you who would like to read earlier postings below are the links:
Part 6:ORM- Framework – Governance
Part 7 ORM- Framework – Planning
Part 11ORM Framework – Execution
Part 12ORM Framework – Visibility
Part 13 ORM Framework – Optimization
Part 14 ORM Framework – Integration