Glossary of terms

This glossary is intended to assist you in getting a general understanding of commonly used terms and concepts when dealing with outsourcing and outsourcing governance. We welcome your contribution to further improve and expand the glossary.

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
There are currently 28 names in this directory beginning with the letter R.
R&D Outsourcing
Research and Development (R&D) outsourcing is the transfer of ownership of some or all processes relating to the research and development of embedded software and systems to a service provider. This may also include software products development

Phase in transition where inhouse operations are gradually phased out and outsourced operations are stabalized in parallel

To transfer an employee from the client company to the service provider.

Reduced Resource Cost
Shall mean the credit per Resource Unit that is applicable whenever the actual consumption of a defined Resource Unit by the Eligible Recipients falls below the Resource Baseline for utilization of such Resource Unit. The total credit will be calculated by multiplying the Reduced Resource Credit by the number of Resource Units below the Resource Baseline actually consumed by the Eligible Recipients

Reduced Resource Credit (RRC)
Reduced Resource Credit (RRC) refers to the credit to the buyer for every resource unit not consumed below the number of resource units at the low end of the dead band

Reference group
A group of companies that are similar in size, revenue and, possibly, industry to the client organization

Regional Buyer
Buyer entity having operations in multiple countries within the same continent

Regional Scope
Regional scope refers to geographic scope of a transaction where employees are covered in a single continent, but in multiple countries

Regional Transaction
Regional transaction refers to a transaction where delivery occurs on a single continent, but in multiple countries

Regulatory requirement
A regulatory requirement is an obligation that is specified by an authority which gets its mandate from a legislative body.

Relationship management
The art and practice of developing solid communication between client and service provider as a form of customer support. This may also be a function within an internal group — to act as a liaison between users and implementers

Correction or a process to correct a failure or a fault in the delivery of a service

The process of evolution of an existing outsourcing agreement. This process is facilitated through effective design and implementation of contract management processes from inception of the outsourcing relationship

Real Estate Outsourcing

Request for Information (RFI)
Document sent to potential service providers of a product or service to collect certain critical facts that enable a capability, resource, experience assessment from a buyers point of view – usually in a predetermined format

Request for Proposal (RFP)
Request For Proposal (RFP) is a request sent out by a potential buyer of outsourcing, soliciting proposals from service providers of outsourcing for delivering the bouquet of services outlined in the RFP.
An RFP generally includes background on the issuing organization and its lines of business, a set of specifications that describe the sought-after solution, and evaluation criteria that disclose how proposals will be graded.
RFPs may also include (1) statement and scope of work, (2) specifications, (3) schedules or timelines, (4) contract type, (5) data requirements, (6) terms and conditions, (7) description of goods and/or services to be procured, (8) general criteria used in evaluation procedure, (9) special contractual requirements, (10) technical goals, (11) instructions for preparation of technical, management, and/or cost proposals.

A requirement is a value attribute, implied or stated by the client, which can be a need, expectation, or obligation. A specified requirement is one that has been explicitly stated (in the contract or an other document), whereas an implied requirement is a need, expectation, or obligation that is common practice or customary. There are many types of requirements. Some of these include quality management requirements, process requirements, product or requirements, statutory requirements, and regulatory requirements.

Retained organization
A small and dynamic group of people within the client organisation which manages the service provider and that responds quickly to business needs. The main responsibility of the retained organisation is to continually align the business units, which are in fact the customers of the retained organisation, and service provider expectations and furthermore to manage the service provider relationship on a daily basis in order to ensure that the sourced services engagement delivers the expected value to the business.

Risk is the potential of losing something of value. The potional value loss or negative outcome has a known or estimated probability of occurrence. The relative size or severity of the risk is measured by 3 dimensions; likelyhood, impact and velocity.

Risk appetite
Risk appetite or risk tolerance is ‘the amount and type of risk that an organisation is willing to take in order to meet their sourcing objectives. Organisations will have different risk appetites depending on their sector, culture and objectives. A range of appetites exist for different risks and these may change over time.

Risk impact
The consequence a critical event has on contract objectives, outcomes or value.

Risk likelyhood
The probability or chance of a critical event to occur

Risk management
Risk management refers to a coordinated set of activities and methods that is used to direct an organtization and to control the many risks that can affect its ability to achieve objectives

Risk register
A current overview of risks, Controls and their status. The status refers to the control schedule, execution and residual risk.

Risk tolerance
How an organization perceives the risk of outsourcing

Risk treatment
Having completed a risk analyses, risk treatment involves selecting and agreeing on one or more relevant options for changing the frequency of occurrence, the effect of risks, the likelihood of detection, or all three and implementing these options.

To address sourcing risks the Value-led governance framework identifies 8 risk treatment opties (strategies):
Avoid - Change activities, processes or objectives to avoid the risk.
Pursue - Pursue the risk or enhance its opportunity of occurrence.
Remove - Remove the source of risk (people, process, tools of external).
Change impact - Undertake actions aimed at reducing the impact of the threat.
Change occurrence - Undertake actions aimed at reducing the probability of occurrence.
Change detection - Undertake actions aimed at increasing the likelihood or speed of detection.
Share - Share ownership and liability with a Third Party (e.g. supplier or insurance).
Retain - Accept the impact of the risk through informed decision.

Risk types
Clearly there is a wide range of risks that may affect the value anticipated from the engagement. Within Value-led governance framework we identify 6 main types of risk grouped into two categories.

1. Deal risk
Strategic risk arises when the service provider’s services, products or activities no longer align with the client’s strategic intent, requirements or expectations. This also included longer term risks, such as losing the capability to execute sourced processes in-house due to loss of talent and knowledge.
Provider risk arises when the service provider operates in an unsustainable manner (i.e. insufficient access to knowledge) or when service delivery is not in compliance with applicable laws and regulations.
Relational risk arises from poor communication and management of the engagement

2. Delivery risk
Service risk arises from services, products or activities of a service provider which do not align with contractually defined requirements.
Financial risk arises when services, products or activities of a service provider generate higher costs or when financial processes are not executed correctly and conscientiously.
Coordination risk arises from the complexity of the arrangement which refers to the number of entities (e.g. contracts, processes, people, technologies, risks, issues) and relationships that have to be managed simultaneously to realize engagement objectives

To identify specific sources of risks across the aforementioned risk types, organizations can make use of the tool Failure Modes and Effects Analyses (FMEA).

Risk velocity
Risk velocity or speed of impact refers to the time it takes for a risk to take effect after it materializes. High velocity risks call for automated Controls to enable early detection.
Risk velocity is determined by 2 factors: 
• TTC - Time To Cause > This is the time period from now and when the critical event is next expected to occur
• TTI - Time To Impact > This is the time period from when the critical event occurs until the impact is experienced
Risk velocity is: TTC + TTI