Managing risks can feel like juggling chainsaws some days.  

With regulations evolving, new risks emerging, and limited internal bandwidth, many organizations find themselves dropping balls.  

That's where outsourcing risk management can help - by offloading operational risk activities to specialized third-party providers such as professional employer organizations (PEOs). 

The core of risk management is combining risk identification, risk assessments, and corrective actions. These involve evaluating and prioritizing organizational risks.  

Key operational risk activities like periodic HR and safety audits can all be expertly handled by outsourcing partners. The benefits of outsourcing risk management services range from cost reduction through improved efficiencies to accessing specialized expertise not available internally.  

External experts can also provide flexible capabilities to manage emerging risks like cyber, climate, etc.  

Ultimately, outsourcing allows your team to focus on core risk strategy and oversight while leveraging external capabilities. With the right partners, outsourcing risk can be a win-win scenario.  

But what exactly are the advantages of outsourcing?  

What Are the Benefits of Outsourcing Risk Management? 

The benefits of outsourcing risk management are clear and compelling: 

1. Cost reduction: Outsourcing leverages third-party providers' comparative advantage to deliver significant cost savings for operational activities. It reduces the need for fixed overhead, labor costs, and capital investments by shifting them to specialized providers. 
2. Improved efficiency: Specialized providers bring operational efficiencies and expertise that save time and allow internal staff to focus on higher-value work rather than routine tasks. Their specialization also leads to higher-quality outcomes. 
3. Access to expertise: Outsourcing provides access to specialized risk management expertise that may not exist internally, especially for new and emerging risk areas. This expertise is invaluable for organizations looking to bolster capabilities. 
4. Flexible resourcing: Outsourcing allows scaling risk management capabilities up or down as needed. Organizations only pay for what they use rather than carrying excess internal capacity. 
5. Win-win incentives: Properly structured outsourcing arrangements incentivize providers to improve services and solutions continuously. For example, performance-based pricing, service level agreements (SLAs), and two-way feedback mechanisms. When providers succeed, clients succeed. 

For organizations looking to optimize spending, access specialized expertise, improve quality, and leverage flexible resourcing, outsourcing checkboxes are all of those benefit boxes. But, like any business decision, it's not all upside. 

What are the drawbacks of outsourcing risk management? 

Outsourcing risk management comes with some potential drawbacks to consider: 

1. Possibility of sharing confidential data: There is always the risk of sharing sensitive data with third-party providers that need to be managed carefully with non-disclosure agreements.
2. Loss of control: Outsourced activities inherently involve some loss of control compared to handling them in-house. However, with a PEO, day-to-day decision-making remains with the employer.  
3. Increased responsibility: Organizations take on responsibility for vendor oversight and need to develop contracting and provider management capabilities. 
4. Undesirable changes: There is a risk of undesirable process changes or misalignment as providers standardize and optimize. Internal stakeholders may prefer the status quo. 
5. Reduced flexibility: Outsourcing certain activities does reduce operational flexibility compared to in-house handling. 
   
   

However, organizations can minimize these risks with deliberate vendor selection, air-tight contracts, and robust oversight. And often, the benefits outweigh the drawbacks for most companies.  

But how can you know if outsourcing suits your risk management needs? 

When do the benefits of outsourcing risk management outweigh the drawbacks? 

Organizations can ensure the benefits of outsourcing risk management outweigh the drawbacks by maximizing those significant upside areas while minimizing the risks. 

The cost and efficiency benefits of outsourcing are often substantial, providing vital budget and capability improvements for organizations. The access to specialized expertise available through outsourcing is extremely valuable as well. 

For most companies, the focus on core competencies enabled by outsourcing simply outweighs the minute loss of control over administrative functions like payroll tax filing. 

Most organizations stand to gain tremendously by outsourcing certain risk management functions.  

But it does require careful planning and execution to do it right. 

It also requires the right outsourcing partner. 

Why choose a PEO for risk management outsourcing? 

PEOs specialize in risk management and provide end-to-end capabilities in areas like HR, compliance, health insurance, and more. They have incredible economies of scale and deep domain expertise from representing thousands of client worksite employees. 

Organizations can stay focused on their core business goals by outsourcing risk management to a PEO while leveraging world-class risk mitigation capabilities.  

PEOs continuously invest in updating risk management technology, systems, and best practices. And they take care of staying current on all relevant regulations and compliance obligations. 

For most companies, the benefits of outsourcing risk management to a PEO far outweigh trying to build similar capabilities in-house. It's like having an entire risk management department for a fraction of the cost. 

While a PEO is great for HR outsourcing solutions like risk management services, you still need to determine whether you should outsource risk in the first place. 

How can you tell if you should outsource risk management services? 

A great way to tell if you should outsource risk management services is to use Easework's HR Risk Assessment. 

This quick assessment analyzes key risk factors across your HR policies, compliance, systems, and operations. It benchmarks your results against industry standards. 

The average score is 60, so you can see exactly how your HR risk management stacks up against other businesses. A low score signals opportunities to reduce risk exposure by outsourcing to experts. 

Give Easeworks’ HR Risk Assessment a try and leverage the results to determine if it could benefit your organization.  

You might be surprised at the opportunities it reveals!