Importance of corporate governance alignment between the enterprise and BPO provider's

Corporate Governance helps align the activities of an enterprise to best meet business and compliance requirements. While compliance requirements and reducing risk exposure dominates the Corporate Governance process, successful enterprises use Corporate Governance to increase corporate security and confidentiality for sharing proprietary information, enable greater collaboration and information sharing, adopt “best practice” standards, and facilitate decision making across all stakeholders. At the heart of Corporate Governance is managing all of the activities across the enterprise.

Good Corporate Governance practice prevents each division or department from independently making and later being held solely responsible for poor decisions. Outsourcing has had a significant impact on the enterprise, and larger firms have expanded the Corporate Governance activities to address global sourcing strategies for outsourcing.

From a Corporate Governance standpoint, Small to Mid-Sized Businesses (SMBs) differs from the larger firms in two important aspects: One, they are more nimble and need flexibility, and second, they tend to focus on shorter-term issues. Privately held SMBs are generally exempt from compliance requirements. For such SMBs, the guiding principle is to deliver value to the business without injecting onerous controls that stifle productivity. To achieve it, the Corporate Governance framework should provide complete transparency on corporate activities and make it simple for users to make, monitor and prioritize all projects/activities. In order to achieve transparency, SMBs will need to establish controls and processes to deliver quality products and services on time and within allocated budgets. From a management perspective, it is critical to effectively allocate and track resources and costs.

Outsourcing can actually enable effective Corporate Governance as it provides a scalable resource base to work in conjunction with internal resources. To make outsourcing successful, the outsourcer’s governance framework must work seamlessly with the SMB’s Corporate Governance. One the principal causes of outsourcing failures is the mismatch in the Governance process. Although mismatches can be best reduced by adopting a common process-centric framework, it is far from easy to implement common processes across two organizations. A less expensive approach is to identify key risk areas in the process and establish clear mitigation strategies. This will help harmonize the governance between the enterprise and the outsourcer.