How Companies Can Mitigate These 7 Risks of Offshoring

Categories: Advice for Start-ups and Entrepreneurs

Running a company can get expensive and overwhelming because of all the departments you need to keep running smoothly. Thus, offshoring is a common strategy for businesses looking to cut costs, access specialized skills, and expand their market reach. 

The benefits of having a diverse global talent pool and securing a distinct competitive advantage are undeniably compelling. Nevertheless, like any collaborative endeavor, embarking on an offshore arrangement with an external service provider entails its own complexities. 

Amid the advantages, companies must navigate the distinct risks associated with offshoring. In this article, we’ll dive into the risks of offshoring and answer the question, “How can you mitigate risk in the offshoring process?” 

7 Risks Companies Face with Offshoring

If you want to implement the offshoring strategy, first learn the risks that can rear their heads during the process. These include the following.

1. Hidden costs

The tricky part about cost-cutting is that, sometimes, unexpected expenses can pop up just when you think you have them all figured out. For example,  unscrupulous recruitment agencies can place charges that you may not know of buried in the inconspicuous and often confusing fine print. 

2. Payroll and compliance issues

Picture navigating through a dense forest with a map that keeps changing its rules—that’s a bit like dealing with international labor laws and regulations during offshoring. One wrong move, and you could find yourself knee-deep in payroll and compliance issues that may lead to fines or something worse.

3. Quality problems

As with traditional recruitment, offshoring success requires the presence of highly-skilled and qualified employees to deliver quality output. However, some agencies may not be screening their candidates well, which can lead to some bad apples. Geographical differences and varying work cultures can throw a curveball into the mix, leading to inconsistency in output quality.

These quality hiccups can cast a shadow on customer satisfaction and your company’s reputation.

4. Data security

When you’re sharing sensitive information and intellectual property across borders, the last thing you need is a weak link in your security chain. Overlooking robust security measures can lead to data breaches and even intellectual property theft.

5. Conflict between onshore and offshore teams

Time zones, communication styles, and cultural nuances hinder effective collaboration between onshore and offshore teams. Misunderstandings and conflicts may emerge, leading to communication breakdowns, slow project progress, and planting the seed of a toxic “us and them” environment within your organization.

6. Loss of control

Imagine handing over the reins of crucial tasks to an external partner and suddenly feeling like you’ve lost your grip on the steering wheel. It’s a common concern that can leave companies a bit adrift.

The worry is that this perceived loss of control can lead to a disconnect between project management and outcomes. The result could be a ripple effect on decision-making and the overall success of your project.

7. Poor cultural match

When the culture of the parent company doesn’t quite sync with that of the offshore team, collaboration can feel like navigating uncharted waters. Those cultural disparities can put a spoke in the wheel of effective teamwork, making knowledge sharing feel like a struggle and causing roadblocks in achieving shared goals.

How Can You Mitigate Risks in the Offshoring Process?

Now that we’ve uncovered the potential hazards, here are some practical strategies to help you weather the offshoring storm confidently and efficiently.

Foster open communication lines with the offshore team and the service provider

Regular communication isn’t just a lifeline; it’s the secret that makes the offshoring journey smooth and seamless. It ensures everyone’s on the same page, bridging the distance and ensuring that the gears of collaboration never grind to a halt. You can communicate constantly through chats, video calls, and quick messages.

Impart your company culture with your offshore team

Just like you’d share tales about your hobbies and adventures with friends, extend that camaraderie to your offshore team. Discuss your company’s passions, values, and mission to foster a positive atmosphere.

It isn’t just about creating a happy environment; it’s about integrating the offshore team with your broader organization. This prevents the “us and them” dynamic from taking root in your firm.

Protect sensitive data and information

Safeguarding sensitive data and intellectual property is a concern when engaging in offshoring. Encryption measures, access controls, and secure communication channels serve as the sentinels of your digital domain, preventing potential breaches and unauthorized access.

By implementing these and other measures, you fortify data protection, ensuring the confidentiality of your proprietary information.

Make the company sign a nondisclosure agreement

Formalizing partnerships through a nondisclosure agreement (NDA) is placing a seal of confidentiality for all involved parties. This legal safeguard ensures that sensitive information remains classified. Requiring your offshore partner to sign an NDA establishes a legal framework that underscores the gravity of data security and cultivates an environment of trust. 

Create a service-level agreement

A service-level agreement (SLA) meticulously sets the expectations, roles, responsibilities, and performance benchmarks for you and your offshore partner. It outlines the harmonious cadence of collaboration between both parties, aligning everyone toward shared objectives while setting a definitive roadmap for operational excellence.

Find a reputable offshore services provider to partner with

It’s crucial to ally with a respected and well-established offshore services provider. This deliberate choice signifies a commitment to excellence and operational efficacy and serves as a cornerstone for risk mitigation.

Choosing the right host country where you will establish your offshore team is equally important. For many, the Philippines is the right match for their organization. Filipinos’ high proficiency in English, great work ethic, and compatible cultural values with both Eastern and Western countries make them easy to work with.

By carefully selecting a reputable partner, such as Manila Recruitment, you position your company to leverage decades of industry expertise. Take advantage of the business’ meticulous planning, strategic guidance, and optimal outcomes to help your company succeed.

Navigating Offshoring’s Waters: A Smooth Sail Ahead

Offshoring offers promising opportunities, yet not without challenges. As you embark on this global journey, remember that foresight and strategic planning are your compass and map. 

You can successfully navigate offshoring by fostering open communication, sharing your company’s essence, fortifying data security, formalizing partnerships, and enlisting experienced allies.

Should you require expert guidance in finding remote and offshore staff, look no further than Manila Recruitment. We’re a recruitment agency in the Philippines with a legacy of experience and commitment to excellence. We are here to steer you toward success.

Contact us today to embark on a journey of seamless collaboration and unmatched expertise!