Councils 'ill prepared' for outsourcing risks

29 June 2009

30 June 2009 | Allie Anderson

Local authorities in the UK are "under prepared" and "ill equipped" to deal with increased supply chain risks associated with outsourcing services, claims a new report.

The document, written by supply chain risk expert David Kaye and commissioned by insurance firm Zurich Municipal, concludes that poor risk management could have a "catastrophic" effect on council services, as well as financial and legal implications.

"Outsourcing a critical service need is so much more than subcontracting and delivery dates. It is a process littered with reputational and political pitfalls as well as statutory and legal risk. These risks need to be actively managed, early on in the process, with clear exit strategies and business continuity plans in place," Kaye said.

"Without imposing this sort of control environment, at senior level, both the risk and cost of partnerships could spiral."

The most common supply chain risks reported by councils included supplier failure, hidden costs and loss of control over service delivery.

A survey of 30 council risk managers and 15 heads of partnerships conducted by YouGov alongside Kaye's report highlighted that while most local authority risk managers recognise outsourcing risks, few tackle them.

Andrew Jepp, head of local government at Zurich, said outsourcing increases the need for councils to assume direct control risk. "To ensure local authorities continue to reap the benefits - rather than suffer the burden of - outsourcing, chief executives, risk managers and partnership directors alike need to work together to manage risk."

SMjun2009

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