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Loss Distribution Approach
A loss distribution approach is a common approach followed by risk management practitioners in order to identify and evaluate the possible risks that they are likely to face in the due course of business. The loss distribution approach has actually been designed by the actuarial practitioners who work in the insurance industry. It is for […]
Great Man Theory of Leadership
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Psychology as a Science and the use of Scientific Methods in Psychological Research
Psychology as a field of study has evolved considerably over last few years with different perspectives, approaches and research interests of psychologists and researchers. But they all have one thing in common and that is relying on the usage of scientific methods. The field of psychology as a scientific area of study is important for […]
Managing risk efficiently and effectively can be a determining factor in the overall success of any organization. Most of the companies try to develop a risk management plan on their own and some outsource this function.
Outsourcing risk management function is not a new concept and is being widely used by many organizations nowadays. However, contracting out risk does not guarantee an organization’s success at all but yes; there are greater chances of success. Reason being, the program is designed, developed, implemented and reviewed by risk management professionals and therefore, can improve the quality of your overall plan.
Outsourcing may or may not be necessary. There are several factors that influence this decision including type of firm, type of risk, company’s current financial status, interior and exterior business environment and level of human intellect.
If company possesses and retains intellectual and knowledgeable people, requirement of outsourcing risk is less. But if, it is an entirely different situation to deal with or company does not possess that level of people, chances of hiring services from outside increase.
Outsourcing or contracting out non-core services may deliver good results and substantial benefits to the organization. In today’s world, any company can employ external sources and utilize their specialized services. The main benefit is that it reduces your cost as well as saves your time. You no longer need to employ all your resources for this particular task.
Once you outsource risk, the routine work within and outside the organization will not be affected. Moreover, it will save your human hours. In addition to this, these specialized services are far less expensive than an in-house risk management plans. So, in wider terms, contracting out risk management can give you triple benefit.
Even after considering all above advantages, outsourcing risk is still a critical decision and needs careful considerations and planning. Unbiased advice from experts is one of the most essential requirements so that they can advice you if you really need to develop a risk management plan or if it so, should you purchase external services. There are several companies offering such specialized services. The need is find one that understands your requirements and suits your budget. Therefore you need to decide before something terribly goes wrong.
Another major issue is that controlling risk is not always required. Sometimes, you can simply let it go. But it doesn’t mean to be careless about it. It simply means you don’t need to develop a full-fledged risk management plans. Initial two-three steps can help averting risk.
A defensive strategy can prove to be extremely useful in some cases. It not only saves your efforts but also your time, money and human resource. If you require only minor alterations avoid contracting out.
Outsourcing risk has its own advantages and disadvantages. The major advantages are:
On the other hand, the process itself can be very risk as you may need to disclose the confidential information to the outsourcing firm so that they can better understand the current standing of your organization.
It may also bring undesirable changes in your company. The need is to keep a check on outsourcing companies and taking a note of their activities.
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