Post COVID there has been significant global and economic factors contributing to upheaval of the traditional ways of doing business.
COVID contributed to significant pressures on the global supply chain, for which the world has not yet recovered. There’s a shortage of everything from shipping containers to microchips. China continues to establish an increasing presence in the world stage, and the Russian Ukraine War/Crisis has further destabilised the world mainly as a result of financial and trading sanctions. There are significant inflationary pricing pressures in Australia, with electricity prices looking to increase by 50% and gas prices to double. There have been significant environmental factors affecting the production of food in Australia, with floods impacting simple vegetable items. Lettuce has been up to $12 per head of lettuce, and some vegetables have spiralled to 24 times their usual cost in week with beans were recently reported at 2,300 % increase.
Higher prices might be here to say, as the impacts of higher transport costs, supply chain disruptions and other increased input costs make their way through the system. Russia’s Ukraine war pushed up crude oil prices which has impacted all suppliers in all markets. The cost of production is not expected to go back down for quite some time just because of the global economic factors.
The factors above, geopolitical (in the case of Russia/Ukraine) and geographical (flooding affecting food production and delivery) clearly can be explained in their contribution to the risk of higher pricing and shortages.
In the same way, there are several offshore destinations that share geopolitical or geographical risks, and this should be factored into an offshore outsourcing decision.
For instance, there are a few companies that have setup offshore outsourcing centres in Sri Lanka that will be affected by Sri Lanka’s significant geopolitical instability recently. This has spilled over into daily life, with an inability to obtain fuel for vehicles to go to work, and electricity outages which restrict home working situations.
In terms of geographical risks, the Philippines is exposed to high incidents of hazards such as typhoons, floods, storm surges, floods, tsunamis, earthquakes, volcanic eruptions, landslides and droughts. In terms of disaster risk, the Philippines was previously ranked third among all countries with the highest risks worldwide.
Australia still continues to face a shortage of skilled workers, especially Australian accounting workers, and more Australian accounting firms are looking overseas for solutions to the work shortage. Due diligence will enable a firm to adequately consider all risks in the selection of an outsourcing services partner.