New risks emerge as the practice of outsourcing matures. Globalization has not only spawned several new business and economic issues that many of us may not even be aware of, but has also helped in defining risks in the outsourcing space clearly.

Defining risks in outsourcing to Global Services Magazine, Peter Brudenall was quoted saying: "At a macro level, risks in outsourcing are often defined as the potential for the relationship to break down, leading to reputational damage and replacement services having to be procured or services brought back in-house." "As a business model, outsourcing has a disproportionately high failure rate, often arising from a lack of alignment between the expectations of the customer and the service provider; a lack of appropriate due diligence by the customer on the service provider's business; or a failure by both customer and service provider to manage the service delivery effectively. At a micro level, there is also the potential for problems such as security failures, poorly delivered service leading to damage the reputation or the failure to achieve cost savings — all of which are clearly risks that need to be managed as part of the contractual process as well as the governance framework between the parties,” he added.

Brudenall also talked about his recent experience advising a company on outsourcing: "I recently advised a company that had failed to control the extent to which their provider was permitted to sub-contract services, and then went very close to sustaining significant losses as the sub-contractor sought to conduct some routine maintenance on services that would have led to severe business interruption for the customer. Retaining control of the services that are outsourced is critical to minimizing the risk of the deal failing."

Brudenall is a partner in the London office of Hunton & Williams LLP. His practice focuses on advising on all aspects of information technology and business process outsourcing, with a specific focus on Indian-based vendors. Brudenall is also the co-author of a recent white paper on Risk in Next Generation Outsourcing.