Mitigating risks in a shared service relationship

The case of a Malaysian bank

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

Purpose - A shared service (SS) arrangement involves an intra-firm interrelationship, since the SS centre (SSC), operated as an independent business unit, provides services to clients who are other independent business units in the same company group. The purpose of this study is to provide an understanding of risks and controls used in mitigating SS risks. Design/methodology/approach - This study adopts a qualitative approach using a case study of a SSC in a bank group in Malaysia. The risks and control framework developed by Das and Teng was used to analyse the appropriate control mechanisms for mitigating internal outsourcing risks, namely relational risk and performance risk. Findings - The main relational risk identified is the possibility of opportunistic behaviour. However, this risk could be mitigated through social control especially when both parties share norms and values. Performance risks in SSC are mainly related to unsatisfactory services in terms of incomplete information, system errors and human mistakes. These risks could be mitigated using either behaviour control or output control. Behaviour control can be exercised through performance reporting, while output control can be achieved through key performance indicators (KPIs) and service level agreements (SLA). Research limitations/implications - This study is limited to a single case study of a SSC with a certain type of arrangement and discusses business process outsourcing (BPO) in general. Future research may examine cases with other SS arrangements, detailed examination of each BPO and incorporate multi-perspective views from both SSC and their clients. Issues concerning changes in control in the evolving situation of SSC and bargaining power and trust in mitigating SSC risks are also worth exploring. Practical implications - The study's findings enable practitioners to draw insights to develop effective control strategies to mitigate risks in intra-organizational relationships such as SSC. Originality/value - The paper adds to our knowledge of control mechanisms for mitigating risks in the SS relationship, which is a relatively new concept in the literature.

Original languageEnglish
Pages (from-to)78-93
Number of pages16
JournalQualitative Research in Accounting and Management
Volume10
Issue number1
DOIs
Publication statusPublished - 2013

Fingerprint

Service relationships
Shared services
Business process outsourcing
Relational risk
Control mechanism
Interrelationship
Outsourcing
Incomplete information
Shared service centers
Information systems
Qualitative approaches
Malaysia
Social control
Opportunistic behavior
Key performance indicators
Design methodology
Control strategy
Service level agreement
Bargaining power

Keywords

  • Internal outsourcing
  • Management control systems
  • Performance risk
  • Relational risk
  • Shared services

ASJC Scopus subject areas

  • Accounting
  • Business and International Management

Cite this

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title = "Mitigating risks in a shared service relationship: The case of a Malaysian bank",
abstract = "Purpose - A shared service (SS) arrangement involves an intra-firm interrelationship, since the SS centre (SSC), operated as an independent business unit, provides services to clients who are other independent business units in the same company group. The purpose of this study is to provide an understanding of risks and controls used in mitigating SS risks. Design/methodology/approach - This study adopts a qualitative approach using a case study of a SSC in a bank group in Malaysia. The risks and control framework developed by Das and Teng was used to analyse the appropriate control mechanisms for mitigating internal outsourcing risks, namely relational risk and performance risk. Findings - The main relational risk identified is the possibility of opportunistic behaviour. However, this risk could be mitigated through social control especially when both parties share norms and values. Performance risks in SSC are mainly related to unsatisfactory services in terms of incomplete information, system errors and human mistakes. These risks could be mitigated using either behaviour control or output control. Behaviour control can be exercised through performance reporting, while output control can be achieved through key performance indicators (KPIs) and service level agreements (SLA). Research limitations/implications - This study is limited to a single case study of a SSC with a certain type of arrangement and discusses business process outsourcing (BPO) in general. Future research may examine cases with other SS arrangements, detailed examination of each BPO and incorporate multi-perspective views from both SSC and their clients. Issues concerning changes in control in the evolving situation of SSC and bargaining power and trust in mitigating SSC risks are also worth exploring. Practical implications - The study's findings enable practitioners to draw insights to develop effective control strategies to mitigate risks in intra-organizational relationships such as SSC. Originality/value - The paper adds to our knowledge of control mechanisms for mitigating risks in the SS relationship, which is a relatively new concept in the literature.",
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author = "Rozita Amiruddin and Aini Aman and {Md Auzair}, Sofiah and Noradiva Hamzah and Ruhanita Maelah",
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AB - Purpose - A shared service (SS) arrangement involves an intra-firm interrelationship, since the SS centre (SSC), operated as an independent business unit, provides services to clients who are other independent business units in the same company group. The purpose of this study is to provide an understanding of risks and controls used in mitigating SS risks. Design/methodology/approach - This study adopts a qualitative approach using a case study of a SSC in a bank group in Malaysia. The risks and control framework developed by Das and Teng was used to analyse the appropriate control mechanisms for mitigating internal outsourcing risks, namely relational risk and performance risk. Findings - The main relational risk identified is the possibility of opportunistic behaviour. However, this risk could be mitigated through social control especially when both parties share norms and values. Performance risks in SSC are mainly related to unsatisfactory services in terms of incomplete information, system errors and human mistakes. These risks could be mitigated using either behaviour control or output control. Behaviour control can be exercised through performance reporting, while output control can be achieved through key performance indicators (KPIs) and service level agreements (SLA). Research limitations/implications - This study is limited to a single case study of a SSC with a certain type of arrangement and discusses business process outsourcing (BPO) in general. Future research may examine cases with other SS arrangements, detailed examination of each BPO and incorporate multi-perspective views from both SSC and their clients. Issues concerning changes in control in the evolving situation of SSC and bargaining power and trust in mitigating SSC risks are also worth exploring. Practical implications - The study's findings enable practitioners to draw insights to develop effective control strategies to mitigate risks in intra-organizational relationships such as SSC. Originality/value - The paper adds to our knowledge of control mechanisms for mitigating risks in the SS relationship, which is a relatively new concept in the literature.

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