Business Process Outsourcing (BPO) is by no means a new business practice – but its risks have certainly evolved.
While there have always been strategic concerns related to cost and governance, today’s businesses have new and emerging risks to contend with, including those related to global compliance with data security frameworks, and increasingly sophisticated cyberattacks powered by AI.
According to Miratech, 74% of companies cite third-party data breaches as their top outsourcing concern. Understandable, considering that 61% of companies experienced a third-party data breach or other security incident in 2024 due to outsourcing arrangements.
And these risks are becoming increasingly unavoidable. Almost every company (98%, according to SecurityScorecard) works with a vendor that has had a security breach at some point, exposing a systemic risk inherent in BPO outsourcing.
But here’s the good news – the right risk-mitigation frameworks can strengthen your defence against these vulnerabilities. How? By embedding security, compliance, and accountability into the end-to-end outsourcing lifecycle, from pre-hire vendor screening to continuous post-hire monitoring.
Understanding today’s biggest outsourcing risks
When organisations do a cost-benefit analysis of outsourcing, it’s important not just to consider the contract price of a BPO partnership – but the associated risks as well.
Hidden costs that typically surface in BPO contracts include risks such as productivity loss, third-party data breaches, and increasingly complex threats to compliance. According to one research paper, what tends to sneak in under the radar include onboarding and familiarisation expenses (2-3% of contract value) and the cost managing redundancies (3-5%). Even then, companies would tend to experience a 20% drop in productivity following outsourcing. Kimon Services also found that integration and transition fees quietly added 10-15% more on top of the contract value – an expense that is regularly overlooked during planning.
Cybersecurity is also a core concern now. Over a third of data breaches in 2024 involved third-party suppliers and vendors – double the percentage from just a year before. Just recently, Qantas suffered a huge cyberattack via its outsourced call centre. 5.7 million customers were affected by the data breach, with the attacker exploiting a vulnerability in airline’s third-party customer servicing platform.
And it’s not just outsider threats organisations need to worry about. Most times when it comes to risk, the call is coming from inside the house. Coinbase suffered an internal breach by two employees of its BPO vendor who illegally accessed sensitive customer records, resulting in up to $400 million in remediation costs by the company.
What is the business impact of unmanaged BPO risks?
Top-of-mind would be the financial impact of a third-party security breach, which was found to cost organization 40% more than internal breaches.
But it’s not just the financial penalties and recovery costs that need to be accounted for. Of the companies that have experienced a third-party breach, 84% also reported operational disruption, 60% were exposed to regulatory scrutiny, and 59% suffered reputational damage.
A successful attack on a third-party vendor can inflict long-term damage on their clients’ customer experience, brand reputation, and compliance. The most immediate fallout may be the erosion of customer trust and loyalty – but in highly regulated sectors, the consequences may be more severe. Companies may face legal exposure from cross-border privacy violations, including breaches of regulations such as GDPR and PDPA.
In 2025, the Toppan Next Tech attack, involving a third-party printer and distributor vendor used by financial service providers, is a prime example of this. Despite the banks sending encrypted files to protect sensitive data, the vendor experienced a data breach, affecting over 11,000 customers of DBS and the Bank of China. In Singapore, organisations like Toppan Next Tech could experience a financial penalty of 10% of the organisation’s annual turnover or up to S$1 million, whichever is higher. As of today, one of the largest financial penalties due to the nation’s Personal Data Protection Act (PDPA) was $60,000 on IT vendor Learnaholic.
These examples highlight that even when vulnerabilities originate from an external vendor, companies are expected to share accountability and consequences.
How HR plays a strategic role in BPO risk-mitigation frameworks
On the surface, BPO partnerships may seem to fall under the realm of Procurement. But in reality, HR leaders play a key strategic role in building strong risk-mitigation frameworks that protect an organization against third-party risks.
Here are some practical steps that HR can take, in collaboration with Procurement, Legal, and IT teams, to de-risk outsourcing:
Rigorous vendor selection and background screening
As with pre-employment background screening, thorough pre-hiring checks on potential BPO vendors is a vital first step for identifying risks early on. And it’s not just the company or its key stakeholders that should be screened – it is equally important that the employees slated to be deployed on the project undergo screening as well. This includes verification of employee credentials, background checks, and more.
Continuous monitoring and re-screening of offshore teams
Even internally, companies are encouraged to ensure ongoing compliance for existing employees. The same goes for BPO partners. Risks are never static, so neither should background screenings be one-and-done. HR teams can set up regular ongoing checks and re-screenings for offshore teams to ensure that, even as people and circumstances change, risks continue to be monitored and updated.
Building in contractual safeguards
While the finer points of BPO contractual agreements are under the purview of legal or business teams, HR can provide a critical perspective on how to define compliance, especially with regard to how offshore teams are managed. This ensures that contract terms are clear regarding exit strategies should the vendor breach any of the agreements related to hiring, managing, or compliance by their employees.
Fostering a cross-functional risk culture
HR teams are organisational leaders when it comes to people and company culture. That puts them in prime position to cultivate collaboration across teams to achieve collective BPO risk management. By setting up the frameworks for Procurement, IT, Legal, and Operations to work together, HR leaders break down silos and encourage shared responsibility, open communication, and faster decision-making when it comes to mitigating outsourcing risks.
RMI protects companies against the hidden costs of outsourcing
Whether for cost-efficiency or scalability, outsourcing remains a key business strategy for expanding into new markets, reducing labour costs, and leveraging on external expertise. But hidden risks may inflate the actual price of your outsourcing contract – unless you know how to identify them early.
RMI is a trusted global screening partner, with intelligence coverage across more than 190 countries. Our services span employment and education verifications, sanction screenings, media checks, reputational checks, and more. More importantly, we have extensive experience in customising the end-to-end screening lifecycle for the BPO context – clients rely on us to design their due diligence workflows, from pre-hiring vendor background checks to ongoing post-hire re-screenings.
In industries that rely heavily on outsourced vendors, such as customer service, fintech, and data operations, companies rely on our strong expertise in compliance to help them navigate global, regional, and local requirements such as GDPR, PDPA, SOC 2, and more.
Protect yourself against hidden costs and second-hand vulnerabilities that regularly arise from BPO partnerships. Book a complimentary Workforce Risk Assessment with RMI’s experts to identify blind spots in your current or planned outsourcing programmes.
