Management of business process outsourcing risks in the commercial banks in Kenya

Abstract

The major changes in the way business is done globally ranging from the growth of borderless multinational corporations, increased competitive pressure, environmental dynamism, the advent of the World Wide Web and e-commerce among others call for changes in the organisation of internal business processes and practices. A key concern for commercial bank executives is managing costs and process efficiency in order to remain competitive. This has seen an escalation in a number of modern philosophies such as business process outsourcing. Outsourcing is a widely accepted business practice by organizations in an effort to improve film performance by cutting costs and focus organisational efforts and resources on core processes. With time commercial banks are moving beyond the outsourcing of non-essential processes. For example there is evidence of increased outsourcing of IT services among commercial banks in keeping with global trends. The increased outsourcing has inherent benefits associated with cost saving and efficiency but also have inherent risks attached. To date no research that has exclusively focused on the outsourcing risk management, especially in the banking industry which is one of the most technology-intensive industries. This paper set out to fill this gap by interrogating the management of outsourcing risk in Kenyan commercial banks. The findings of the study support the existence of a moderate positive relationship between BPO and outsourcing risk management which has a cascading effect on performance. The inherent costs and risks associated with business process outsourcing do not exceed the positive effects. It is thus implicit that BPO enhances the performance and image of commercial banks in Kenya