Study: Effectiveness of Corporate Governance Programs Challenged by Outsource Model

31 Mar, 2010, New York

Cushman & Wakefield, the world's largest private held commercial real estate services firm, and CoreNet Global, the world's leading professional association for corporate real estate and workplace executives, today announced the publication of a Business Briefing outlining concerns and recommended solutions for the changing roles of governance programs when an outsourced partner is involved.

"Governance is the foundation from which an outsourcing partnership succeeds or fails," said Bruce Ficke, executive vice president, global head of Cushman & Wakefield's Client Solutions group. "Today, outsource providers are responsible for everything from risk mitigation to security, business ethics, protocol, tools, and data, and financial management. Therefore, as outsource providers take on more responsibility for key corporate functions, the need to become involved in the creation, implementation and enforcement of a client firm's outsource governance programs has never been greater."

As large firms increasingly rely on complex outsource models, responsibility for decision making and core business functions gets shifted from managers who reside inside the firm to Corporate Real Estate (CRE) service providers outside of the client firm's domain. Under these circumstances many companies have realized that the outsource provider is not involved in the management of Governance Programs and therefore poses a non-compliance risk within the client's organization.

The result is that many of the benefits of outsourcing - such as creating efficiencies, mitigating risk, fostering best practices, and lowering costs - are not maximized. The Cushman & Wakefield/CoreNet briefing points out that with corporate outsourcing efforts set to grow in this economy, these challenges will likely increase and thus solutions to address governance issues are needed.

Cushman & Wakefield's Business Briefing offers a unique expertise in understanding the value of Governance Programs and how and where the outsource real estate partner should be involved. Noted in the briefing are results from a recent survey of senior corporate real estate executives initiated by Cushman & Wakefield and CoreNet. The survey notes that 86% of respondents indicated Governance was a critical factor to the success of an outsource partnership. The report offers readers suggestions as to how global corporations can better understand the importance of governance, the benefits derived and provides guidelines for creating Governance Programs in conjunction with an outsource provider.

According to the report, a strong and effective Governance Program aligns outcomes to objectives; establishes an effective and efficient operating model; empowers team members to perform the task they are assigned; ensures compliance with contractual agreements; minimizes risk and disruption; promotes innovation and adoption of best practices; and supports change management.

Governance Programs and/or CRE-specific Governance Programs, allow these functions to happen efficiently and effectively and under the utmost control and a realistic framework. They set out rules surrounding the operation of real estate in an outsourcing relationship so each team member can hold up their individual end of a bargain in delivering strategic value to the organization.

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