AUDITING BUSINESS

PROCESS
OUTSOURCING
INDUSTRY
 OVERVIEW
Business process outsourcing (BPO) remains a strong trend
among organizations regardless of size. As early as 2010, 60
percent of CEOs at global enterprises believed that BPO pla
a very important role in supporting business models (Forbe
Insights survey). Today, nearly all companies outsource som
part of their operations. Oxford Business Group predicts th
the global business process outsourcing industry will be wo
$250 billion by the year 2020. Business process outsourcing
the Philippines accounts for 10 to 15 percent of the global
market, where the local BPO sector has grown at a compou
annual rate of 10 percent over the past decade. The Philipp
has also consistently ranked among the top five outsourcin
 u l e
Mod tives:
Ob j e c Know the nature and background of the
particular specialized industry;

Learn the overview, statistics, and updates

of the specialized industry in the Philippine
setting:

Identify the different audit considerations

and trends for the industry.
 Nature and Background of
Specialized Industry
Business process outsourcing (BPO) is the practice of contracting a specific w
process or processes to an extemal service provider. The services can include
accounting, telemarketing, data recording, social media marketing, customer
support, and more. BPO usually fills supplementary as opposed to core busines
functions, with services that could be either technical or nontechnical.

From fledgling startups to massive Fortune 500 companies, businesses of all s

outsource processes, and the demand continues to grow, as new and innovati
services are introduced and
 Nature and Background of
Specialized Industry
fills supplementary as opposed to core business functions, with services that co
be either technical or nontechnical.

From fledgling startups to massive Fortune 500 companies, businesses of all siz
outsource processes, and the demand continues to grow, as new and innovative
services are introduced and businesses seek advantages to get ahead of the
competition. BPO can be an alternative to labor migration, allowing the labor fo
to remain in their home country while contributing their skills abroad.
 MAIN TYPES OF
SERVICES
Back Office Front Office

Back-office services Front-office services

pertain to the contracting
include internal business
company's customers, such
processes, such as billing or as marketing and tech
purchasing. support.
 CATEGORIES O
BPO
Offshore Vendors Nearshore Vendors Onshore Vendors
OFFSHORE VENDORS ARE NEARSHORE VENDORS ARE ONSHORE VENDORS OPERATE WITHIN
LOCATED OUTSIDE OF THE LOCATED IN COUNTRIES THAT THE SAME COUNTRY AS THE
COMPANY'S OWN COUNTRY. NEIGHBOR THE CONTRACTING CONTRACTOR, ALTHOUGH THEY MAY
FOR EXAMPLE, A U.S. BE LOCATED IN A DIFFERENT CITY OR
COMPANY'S COUNTRY. FOR
STATE. FOR EXAMPLE, A COMPANY IN
COMPANY MAY USE AN EXAMPLE, IN THE UNITED SEATTLE, WASHINGTON, COULD USE
OFFSHORE BPO VENDOR IN THE STATES, A BPO IN MEXICO IS AN ONSHORE OUTSOURCING VENDOR
PHILIPPINES. CONSIDERED A NEARSHORE LOCATED IN SEATTLE, WASHINGTON,
VENDOR. OR IN HUNTSVILLE, ALABAMA
 CUSTOMER INTERACTION
SERVICES

BACKOFFICE
TRANSACTIONS

EACH BPO COMPANY WILL IT AND SOFTWARE

SPECIALIZE IN SPECIFIC OPERATIONS
SERVICES. THEY MAY BE
GROUPED AS FOLLOWS: FINANCE AND
ACCOUNTING SERVICES

HUMAN RESOURCE
SERVICES

KNOWLEDGE SERVICES
 CUSTOMER INTERACTION
SERVICES
The BPO company would cover a business’s voicemail services, appointment schedules, email services,
marketing program, telemarketing, surveys, payment processing, order processing, quality assurance, customer
support, warranty administration, and other customer feedback.

BACKOFFICE TRANSACTIONS

This includes check, credit, and debit card processing; collection; receivables; direct and indirect procurement;
transportation administration; logistics and dispatch ; and warehouse management.

IT AND SOFTWARE OPERATIONS

These technical support functions include application development and testing, implementation services, and IT helpde
 FINANCE AND ACCOUNTING
SERVICES
These functions include billing services, accounts payable, receivables, general accounting, auditing, and regulatory co

HUMAN RESOURCE SERVICES

BPOs can help address w orkforce challenges. They can also cover payroll services, healthcare administration,
hiring and recruitment, workforce training, insurance processing, and retirement benefits.

KNOWLEDGE SERVICES

These higherlevel processes may include data analytics, data mining, data and knowledge management, and
internet and web research, as well as developing an information governance program and providing the voice
of customer feedback.
HOW DOES BPO WORK?

Decision to Outsource
Evaluation Process
Financial and Technologica
Considerations
SCOPE OF WORK
Cost Efficiency
Focus on Core Competencies
Scalability
Access to Global Talent
Improved Service Levels
SCOPE OF WORK (CHALLENGES)
Communication Barriers
Data Security
Quality Control
Overview, Updates, Statistics of the Specialized
Industry in the Philippines

1. Early Beginnings (1980s - 1990s)

2. Government Support and Expansion (1990s - 2000s)
3. Rapid Growth and Diversification (2000s - 2010s)
4. Current Trends and Future Outlook (2010s - Present)
 2. Investors in the Philippine BPO industry are offered a sizeable number of
incentives, including tax holidays, tax exemptions on imported equipment,
simplified import procedures, and freedom to employ foreign nationals.

Y FACTORS
5 KE POin PH
Industry
3. Filipino employees are not only fluent in Western-accented English as
compared to their Indian counterparts but are also more patient; a trait which
Growth of B comes in handy when facing irate customers. Their close affinity to Western
culture, and high problem-solving capabilities also set them apart from other
similarly skilled workforce.

4. The government is always quick to pass key legislative changes which favor
global organizations looking to outsource to Philippines. A recent example for the
same would be the Data Privacy Act, which puts into place stringent international
quality data privacy standards, thereby ensuring that sensitive information being
handled daily remain secure.

5. Philippines focuses on growing industries in both voice and non-voice

sectors such as global in-house centers (GICs), healthcare information
DA NADELLA management, animation, and gaming also ensured future BPO growth in the
S & SATY
BILL GATE country.
 Investment pledges for January to July 2020 are 37-percent higher compared
to the same period in 2019.

O
IBPAP CEO Rey Untal said the pandemic will significantly affect the 2020

BP headcount and revenue projections. He added that it will also cause changes in

S
the existing work and service models within the industry.

L IP PIN E
PH I The IT-BPM industry continued its business operations and increased its
capacity amidst the community quarantines with the support of different

T IS TIC S govemment agencies - Department of Trade and Industry, the Philippine

A
Economic Zone Authority, and the Inter-Agency Task Force on Emerging

ST Infectious Diseases.

According to UNESCO, the Philippines has an average of 98.2-percent literacy

20 2 0 rate-98.2% for females and 98.1% for males.

There are 788 BPO companies composed of large and SMEs, according to PEZA.
 S O F
F E C T
F
E ID 19
C O V
1. Employment Status:
- 60% of BPO employees are still employed due to the work-from-home
strategy.
- 22% continue to work from the office with government-mandated
support (accommodation, shuttle, meals).

2. Pre-Pandemic Work-From-Home:
- 40% of workers were already working from home before the lockdown.
3. Retrenchment Concerns:
- 18% of IBPAP member companies are considering
retrenching employees.

4. Growth Expectations:
- 36% of IBPAP companies do not expect growth, while 3% to
7% still foresee some growth.
5. Global Industry Impact:
- Travel, hospitality, and tourism were hardest hit by the pandemic due to travel restrictions
and quarantines.

6. E-commerce and Related Sectors:

- Community quarantines have fueled growth in e-commerce, financial services, and logistics
industries.

7. Investment in New Normal:

- Companies are investing millions to facilitate work-from-home setups as part of adapting
to the new normal
 I T
S
A
I
U
D
D
E R A T I O N S THE RISKS OF
C ON
BUSINESS
PROCESS
OUTSOURCING
 AUDIT TIONS THE RISKS OF 1. SECURITY
N S I D ERA
CO
BUSINESS 2. UNDERISTIMATING THE COSTS OF SERVICES
PROCESS 3. OVERDEPENDENCE ON SERVICE PROVIDERS
OUTSOURCING 4. COMMUNICATION ISSUES
 1. DATA BREACHES
2. QUALITY CONTROL
3. OPERATION RESTORATION
AUDIT TIONS OTHER RISKS OF
N S I D ERA 4. NONLOCAL EMPLOYEES
CO
BUSINESS 5. MAINTENANCE OF STRATEGIC ALIGNMENT
PROCESS 6. POLITICAL INSTABILITY
OUTSOURCING 7. CHANGES IN TECHNOLOGY AND EXPOSURE TO
HACKING
8. SPECIALIZATION TO THE POINT THAT THE NICHE
DEMAND IS NO LONGER NECESSARY
 SPECIAL ECONOMIC ZONE ACT

AUDIT TIONS
INCOME TAX HOLIDAY OR CORPORATE INCOME TAX EXEMPTION
N S I D ERA FOR 4 TO 8 YEARS
CO
TAX OPTION TO PAY A 5% GROSS INCOME TAX IN PLACE OF ALL
NATIONAL AND LOCAL TAXES AFTER THE TAX HOLIDAY
CONSIDERATIONS
TAX-FREE AND DUTY-FREE IMPORT OF CAPITAL EQUIPMENT,
SPARE PARTS, SUPPLIES AND RAW MATERIALS
PERMANENT RESIDENT STATUS FOR FOREIGN INVESTORS (WITH
THEIR IMMEDIATE FAMILY) WITH AN INITIAL INVESTMENT OF US$
150,000
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YOU!
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