Determinants of Operational Risk in Global Sourcing of Financial Services: Evidence from Field Research

The practice of global business process outsourcing (BPO) has gone beyond call centers to expertise-intensive functions such as tax accounting, equity research, cash flow forecasting, fixed income asset pricing research, transaction processing, supply chain coordination, and even research and development (R&D).1 Worldwide BPO is projected to reach $133.7 billion in 2005, an 8 per cent increase from 2004 revenue of $123.8 billion, according to the Wharton Gartner Research Forecast (2003).2 The production of business processes is different from the production of physical goods in some important ways. First, the production of business processes involves no movement of physical goods, raw materials, inventories, or shipping and delivery costs. Here, inputs, output, and work-in-process are all information. Second, there is often minimal latency between the production of a process by a service center and its being bundled into a service for the end cus tomer. An offshore service provider (a BPO firm) may process all the savings and checking account-related transactions of customers, and these customers may well make decisions based on their account balances a few minutes after the