Every business faces its share of uncertainty on a daily basis. Even if you think you’ve covered all the bases, risks have a way of showing up when you least expect them. Managing those threats properly can be the difference between steady growth and serious setbacks.
But building your own risk management team inside the company can take a lot of time and cost a pretty penny. Many businesses simply don’t have the resources to do it well on their own.
That’s why outsourcing risk management is gaining traction.
Outsourcing lets you work with people who spend their careers studying risks and know how to act fast when problems show up.
IBM reported that organisations that had an incident response (IR) team saved a lot of money when they had a data breach. On average, they saved US$2.66 millioncompared to those without an IR team and plan.
That’s a pretty significant saving (around 58%) in breach costs. What more when you outsource?
Let’s further break down what risk management is, why it’s critical for your business, and how outsourcing it can give you a competitive edge.
Table of Contents
- What is Risk Management?
- Importance of Getting Risk Management Done Right
- 7 Advantages of Outsourcing Risk Management
- Potential Challenges to Consider When You Outsource Risk Management
- How to Choose the Right Outsourcing Risk Management Provider
- Build a Successful Risk Management Outsourcing Strategy
- Strengthen Your Business with Outsourced Risk Management
- FAQs
What is Risk Management?
Risk managementis how businesses stay one step ahead of trouble. It’s the process of figuring out what could go wrong, how bad it could be, and what you can do about it.
That includes everything from market fluctuations to lawsuits, tech breakdowns, or natural disasters.
You’re not trying to erase every risk, because that’s not how the world works. What you’re doing is staying sharp. Risk management helps you make better decisions, take calculated chances, and recover faster if things take a turn.
Importance of Getting Risk Management Done Right
If you get risk management wrong, it’s not just about losing money. It could mean facing legal action, losing customer trust, or even closing shop.
PwC’s recent Global Risk Survey found that nearly eight in ten companies are strugglingto keep up with today’s risks, especially with all the digital threats and compliance rules piling up.
When you get it right, risk management becomes a strength. It lets you roll with economic punches, respond to new laws, and show your stakeholders that you’re in control.
It also makes it easier to move quickly, knowing someone’s looking out for what could trip you up.
7 Advantages of Outsourcing Risk Management
Don’t worry, you’re not pushing problems onto someone else when you choose to outsource risk management. You’d be teaming up with people who know how to spot trouble before it becomes a crisis.
Here’s what you get out of it:
1. Access to Specialised Expertise
People who work in risk management have spent years studying what makes businesses stumble and how they bounce back. They notice patterns that might not be obvious if you’re inside the company.
Outsourcing is a smart way to broaden that pool of expertise, as it might not be easy to find risk managers or related experts locally.
2. Cost Efficiency
Building your own risk team means more than just paying salaries. You’ll need to train them, buy tools, and keep everything running smoothly. Outsourcing helps you avoid those fixed costs.
In fact, you can save up to 70%in your labour and operational spending by outsourcing. Which is great if your business is still growing or managing a tight budget.
3. Better Tools and Technology
Specialist risk firms use tools built for the job. These could be technologies that track regulations, find weak spots, and simulate different risk scenarios.
You probably wouldn’t buy these tools yourself because they’re expensive and complex. But when you outsource, you get access to them anyway. It’s a simple way to work smarter without spending extra.
4. Scalability
Your business isn’t static. As you expand, shift focus, or try something new, your risks change too.
With outsourced support, you can adjust how much help you need at any time. That flexibility means you’re not overcommitted or underprepared.
5. Increased Objectivity
Someone from outside your companybrings a clean perspective. They’re not caught up in office politics or stuck in how things have always been done.
That helps you see blind spots and make clearer decisions. A neutral opinion can be more helpful than you’d expect.
6. Faster Response to Emerging Risks
Trends, threats, and rules evolve constantly. Risk management providers stay up to date, so you don’t have to chase every new headline.
When something changes, they’re already on it and ready to help. That responsiveness can save you time, money, and stress.
7. Focus on Core Business
Thinking about all the things that couldgo wrong is important, but it can pull you away from what you’re actually trying to do.
When you bring in outside help to manage those risks, your own team can put their energy into taking care of your customers, figuring out how to grow, or just building something solid that will stick around. Let the experts handle the ‘what ifs’ so you can focus on the ‘what’s next’.
Potential Challenges to Consider When You Outsource Risk Management
Risk management outsourcing has its trade-offs. Here’s what to keep in mind:
- Loss of direct control– You’re handing over part of your operations to someone outside the company. If communication isn’t clear, mistakes happen.
- Data security risks– Sharing sensitive info always comes with risk. Make sure your provider has strong data security policies.
- Alignment issues– If the external team doesn’t get your business or culture, their advice might not hit the mark.
You don’t avoid these problems by staying in-house. You deal with them by setting expectations early, keeping communication open, and working with people who understand your business.
How to Choose the Right Outsourcing Risk Management Provider
When you’re picking a partner to help you with risk management, here’s what you should really pay attention to:
- Do they get your world?You want someone who understands your industry. A company that usually works with banks might not have a clue about what a construction business deals with.
- What have they actually done?It’s not enough to just take their word for it. Ask for real examples of their past work and what results they’ve gotten for other companies.
- Do they follow the rules?They should be using well-known standards, like ISO 31000 or COSO. It shows they know what they’re doing.
- Will they get along with your team?Can they talk to your people easily? Will they respect how you like to work? A good fit here makes a big difference.
- Is it tailored to you?Risk management planning can’t be copied and pasted. The people you choose should be creating a plan that’s specifically designed for what your business needs.
Build a Successful Risk Management Outsourcing Strategy
Just handing off risk management isn’t the whole story. It works best when you’ve got a bit of a roadmap.
Here’s how to make it effective:
- First, figure out what you’re up against.Run a risk audit and take a good look at all the potential threats your business faces and how big of a deal each one is.
- Then, decide what you want to achieve.What does a win look like? Maybe it’s fewer problems with regulations or being able to handle incidents faster.
- Get it all down in writing.Make sure you have clear agreements (SLAs) that spell out who’s doing what and how you’ll know if it’s working.
- Have a point person on your end.Pick someone from your company who will be the main contact for the outside risk management team.
- Don’t just set it and forget it.Things change, so you’ll want to check in on your plan every few months to make sure it still fits.
Strengthen Your Business with Outsourced Risk Management
No matter what you’re building or offering, there’s always going to be some level of uncertainty, some bumps in the road. What makes the difference isn’t avoiding every single potential issue (because you probably can’t) but how you handle things when they come up.
When you’ve got a solid team helping you see around those corners, you can react more quickly, make smarter moves, and just feel more ready for whatever the future throws your way.
Outsourcing risk management lets your company have that extra layer of confidence. You’re operating knowing you’ve got people in your corner who are thinking about the what-ifs, so you can keep your focus on the ‘what’s important right now’.
FAQs
What kinds of risks do businesses usually get outside help with?
You often see companies outsourcing things like keeping their IT systems secure, managing financial risks (like making sure they’re following the rules and preventing fraud), and, of course, just the day-to-day operational risks and staying on top of regulations.
How can paying someone else to handle risk management save me money?
You’re not having to hire a whole new team internally, pay their salaries, train them up, or buy all the software they’d need. You’re basically just paying for the expertise you need when you need it.
How do I make sure the people I hire for risk management get what my business is all about?
It’s super important to have in-depth chats with them right from the start about how your business works, the specific risks in your industry, and how much risk you’re comfortable with.
And then, just keep talking to them regularly and sharing information as you go.
What’s the difference between the ISO 31000 and COSO risk management frameworks?
Think of ISO 31000 as more of a set of general principles and guidelines for managing risk that can apply to pretty much any type of organisation. COSO is often more focused on internal controls and financial reporting, particularly in the US.