FAQ
Why is internal audit outsourcing an important option for companies?
Internal Audit represents a support function largely dictated by regulation. It is not a core activity of the company and outsourcing represents an option for companies to have the benefit without having to manage it.
What is the main benefit of outsourcing internal audit? Whilst there are many, the main benefit is cost effectiveness of the function and the downsizing and streamlining of management to focus on core activities only.
Would there be erosion in confidentiality of company sensitive information? No. BPO contracts can cover these adequately. Professionalism of BPO service providers also guarantee this. Also concerns of confidentiality exist even if the function is not outsourced.
What are the common pitfalls in BPO outsource contracts? No clear understanding of the roles and responsibilities of management and BPO service provider over the outsourced function.
Will the company lose control over the outsourced function? No. BPO service provider reports to the Audit Committee who will direct and agree on audit plan and scope for each year. Changes to plan only with approval of Audit Committee.
What options are there in respect of the structure of the outsourced function? 3 options available to the company:
1) Total staff takeover by service provider
2) Partial staff takeover, company to redeploy remaining staff
3) No staff taken over. Redeploy or retrench staff remaining in the dept.
Which is the ideal scenario for the employee, the company and the BPO service provider? All staff of the outsourced function to be redeployed if still needed by the company or retrenched and fresh terms offered by the service provider on a back to back basis. This option yields the best benefit for the employee in terms of a lump sum retrenchment benefit and certainty of employment. For the company, there is the potential for substantial cost savings over the period of the BPO contract. For the service provider, there is no disruption to staff integration due to common terms and conditions of employment for all staff.
Will the services of a legal firm to cover HR aspects be necessary? Yes. This is strongly advised to avoid any unnecessary HR related issues.
What are the other known costs to anticipate? Besides legal and stamping fees for the BPO contract, nothing else of a material nature.
Are there any hidden costs to be concerned about? No. the BPO fee is fixed for the period of the contract. Any new costs would be third party costs which can only be incurred with the prior approval of the company
Can the company be certain that the information and reports currently being received shall continue as a minimum? Indeed. The benefit of outsource is the enhancements that accrue to the company through other value added services and access to best practices that the BPO service provider can offer at no additional cost.
How will the understanding between the company and the service provider be evidenced? By way of a BPO contract agreement to cover the respective rights and obligations of the parties.
How long is a typical BPO contract? Anything from 1 to 10 years. We recommend a period of 3 years to allow for benefit creation and continuity.
Can changes be made to the BPO contract during the term of the contract? Yes. If the terms are found to be overly onerous on one party or if unknowns become apparent requiring a review of the original contract. This is advisable to save the relationship and will only be done with the consent of both parties.
What is the main benefit of outsourcing internal audit? Whilst there are many, the main benefit is cost effectiveness of the function and the downsizing and streamlining of management to focus on core activities only.
Would there be erosion in confidentiality of company sensitive information? No. BPO contracts can cover these adequately. Professionalism of BPO service providers also guarantee this. Also concerns of confidentiality exist even if the function is not outsourced.
What are the common pitfalls in BPO outsource contracts? No clear understanding of the roles and responsibilities of management and BPO service provider over the outsourced function.
Will the company lose control over the outsourced function? No. BPO service provider reports to the Audit Committee who will direct and agree on audit plan and scope for each year. Changes to plan only with approval of Audit Committee.
What options are there in respect of the structure of the outsourced function? 3 options available to the company:
1) Total staff takeover by service provider
2) Partial staff takeover, company to redeploy remaining staff
3) No staff taken over. Redeploy or retrench staff remaining in the dept.
Which is the ideal scenario for the employee, the company and the BPO service provider? All staff of the outsourced function to be redeployed if still needed by the company or retrenched and fresh terms offered by the service provider on a back to back basis. This option yields the best benefit for the employee in terms of a lump sum retrenchment benefit and certainty of employment. For the company, there is the potential for substantial cost savings over the period of the BPO contract. For the service provider, there is no disruption to staff integration due to common terms and conditions of employment for all staff.
Will the services of a legal firm to cover HR aspects be necessary? Yes. This is strongly advised to avoid any unnecessary HR related issues.
What are the other known costs to anticipate? Besides legal and stamping fees for the BPO contract, nothing else of a material nature.
Are there any hidden costs to be concerned about? No. the BPO fee is fixed for the period of the contract. Any new costs would be third party costs which can only be incurred with the prior approval of the company
Can the company be certain that the information and reports currently being received shall continue as a minimum? Indeed. The benefit of outsource is the enhancements that accrue to the company through other value added services and access to best practices that the BPO service provider can offer at no additional cost.
How will the understanding between the company and the service provider be evidenced? By way of a BPO contract agreement to cover the respective rights and obligations of the parties.
How long is a typical BPO contract? Anything from 1 to 10 years. We recommend a period of 3 years to allow for benefit creation and continuity.
Can changes be made to the BPO contract during the term of the contract? Yes. If the terms are found to be overly onerous on one party or if unknowns become apparent requiring a review of the original contract. This is advisable to save the relationship and will only be done with the consent of both parties.