Summary
Increased overseas costs, security dynamics and the sudden availability of newly jobless employees has changed the offshoring dynamics. Offshoring continues but the repetitive tasks with high risk and control difficulties are getting out of the offshoring matrix. In this analysis I look at the effects of these changing dynamics in relation to auditing and control factors.
Analysis
1. The referred article speaks of jobs being relocated to the US from India with consequent reduction in costs and improvement in goodwill and other factors.
2. Offshoring will continue but then the dynamics will change. As per the comparative advantage theory costs have risen in India and other countries. Therefore it makes sense not to offshore.
3. There has been a string of security failures in offshore locations. Offshoring has also given rise to auditing and control questions.
4. The kind of control and audit questions which offshoring gives rise to are:
- How does one monitor the physical quality of human resources
- How does one monitor the leakage of confidential financial information
- How can processes be protected and monitored
- Is a electronic trail sufficient or is a paper trail also required
- There are questions of monitoring costs in a fast changing foreign exchange scenario
5. These are some of the questions which in my opinion are going to impact offshoring going forward.
Nitish Grover consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
