Internal auditors urge public sector boards to get assurance on risks of outsourcing
Public sector boards should not approve strategically important outsourcing projects “without first getting full assurance from their internal audit teams that the potential risks have been properly considered and effective controls are in place”, the Chartered Institute of Internal Auditors has said.
In a report the Institute warned that failure to foresee and manage outsourcing risks could result in service failures, delays in the implementation of new projects, significant additional costs and reputational damage.
Such outcomes could undermine the cost savings and other benefits that outsourcing is intended to deliver, it added.
The Institute also argued that getting outsourcing right was increasingly important as it becomes more widespread among organisations seeking to cut costs and increase efficiency by buying-in specialist services.
It predicted that the increase in outsourcing by the public sector between 2010 and 2014 would continue with the pressure on public spending.
Dr Ian Peters, chief executive of the Chartered Institute of Internal Auditors, said: “Outsourcing the service does not outsource the risk. Organisations may think they have thrown the risk ‘over the fence’ but this is absolutely not the case.
“Internal audit can support boards in relation to outsourced services. There should be an appetite at board and senior management level for assurance that the risks of outsourcing are being managed so that the organisation’s achievement of its strategic objectives is not compromised.”