The risks of outsourcing services at selected facility management companies in Cape Town

Abstract

The outsourcing of facility management services has become increasingly competitive and success now depends on companies’ ability to assess and manage risks of low employee morale, intellectual property right, legal, increased costs, unrealistic savings projections and reputational damage successfully. This paper examined outsourcing risks at selected facility management companies in Cape Town. Previous study identifies loss of control, cost and life cycle impact and time inefficiency as anecdotal evidence of outsourcing risks. In the facility management sector, the identification and management of risks have begun to shift progressively from external to internal – like resource and capability management and the strengthening of internal control mechanism. This quantitative study utilised self-administered questionnaire to collect data from 142 randomly selected respondents; employees of participating facility management companies in Cape Town. The paper found that top 6 risks ranked from the highest are information security, legal, ethics/compliance, contractual, financial and economic. The higher end of the mean scoring indicates a greater emphasis on controllable (internal) risks, with 4 out of the top 6 ranked items identified within the internal risks’ category. This research provides insight to understand outsourcing, risks of outsourcing and risk assessment techniques with emphasis on internal risk management. The examination of outsourcing risks enables companies to understand risk assessment, evaluation and mitigation requirements and categorisation for successful management of risks associated with the outsourcing of facility management services.