Analysis of Risk Management Across Segments

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Cross-border project development and management system, automated production control, resuable assets, and the focus on ‘people’ is the new mantra for managing risks

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Analysis of Risk Management Across Segments

  1. 1. GS 100: Analysis of Risk Management Across Segments Cross-border project development and management system, automated production control, resuable assets, and the focus on ‘people’ is the new mantra for managing risks by Ashwin Razdan T He last decade witnessed a substantial growth in No. of companies having a system to mitigate various risks. outsourcing. existing services providers evolved Risk Factor No. of companies into becoming market leaders and many new (having a system)* ones took birth to address the need of niche markets. 1 Labour operations Costs/Non-Labour 69 The dawn of recession compelled the industry to adopt Operations Costs new practices and embrace automation to improve 2 Security Risk 82 productivity at various stages in a project lifecycle. The 3 Employee Attrition/ Scalability risks 88 patience level of the customer dropped. It was impor- 4 Bringing processes onshore due to 54 tant to deliver. Hence, service providers (at all levels) government regulations began analyzing risks more seriously and built impres- 5 Uneven Performance 78 sive mitigation strategies. 6 Risk of SP failing to deliver 59 Most Band 1 (with annual revenue between 1M- Note: Figures are based on data from over 150 companies 10M) companies continue to depend on third-party nisms defined to capture any failures or non-perfor- certification (like ISO) to manage security risks. 46% mances proactively. These monitored mechanisms of respondants in this category claimed to have unique include tools such as internal and external audits, dash- employee assessment system, proprietary career devel- boards, quality score cards, management reviews etc. opment system, and free certification and education which ensures failure avoidance in the standard proce- for their employees to manage increasing attrition rate. dures. A few use online HR systems to statistically pre- A common pratice noticed across the band is the usage dict and analyze the labor cost. These costs are moni- of reward program for employees. 15% routed projects tored and analyzed in real time at corporate level. to delivery centers at cheaper locations when labor Band 3 (with annual revenue between 100M-1 B) and costs went up. One of the favorite destination being Band 4 (with annual revenue of over 1B) companies lay China’s tier 2 cities. significant focus on the global delivery model. excellent The trend noticed in Band 2 (companies with an- coordination is maintained between onsite, offsite and nual revenue between 10M-100M) was significantly offshore delivery locations to produce a low risk, cost ef- different. Companies depend highly on technology to fective, predictable project outcome. Over 80% of band manage risks associated with labor and non-labor op- 4 companies have made significant investments in mul- erations costs. Over 70% have a system for production tiple areas to mitigate the risks associated with labor and control where cost of services, projects and back office non-labor operations costs. Reuse has been identified as is registered. This information is periodically analyzed an integral part of the organization strategy to improve and contrasted with the estimated budgets for each op- productivity. Development of tools, assets, prototypes eration, and actions are established to control the cost and references to the single source of ‘legacy’ informa- level, avoiding deviations from the established thresh- tion ensures that the project teams continually deliver olds. 18% maintain a dedicated audit team that ensures high quality and consistent services leading to a lower every project team complies with all policies set by the cost of software delivery. Further, 40% of respondants company and their clients. employees working for this continue to hire fresh talent in great numbers from local band are often subject to desktop inspections at any universities to keep labor costs low. time, and the audit group performs random inspec- Only a handful use proprietory tools that accurately tions periodically. All employees are required to sign identify and mitigate risk as well as determine an internal nDA and also client-specific nDAs. appropriate contingency dollar estimates. 5% also use Most service providers manage risks by adhereing to key performance indicators that provides comprehensive global standards such as ISO, COPC, CMM and PCMM. real-time data and statistical analysis on individual Adopting these models ensures that there are mecha- performance. GS 16 GlobalServices www. globalservicesmedia.com GS100-2010

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