Outsourcing and SarbOx.

The article discusses outsourcing and the Sarbanes-Oxley act in the United States. There has always been liability associated with outsourcing because key functions are being performed by another party, but with the Sarbanes-Oxley act the stakes have been raised significantly. The liability for the consulting firm is huge. In crafting deals, it is important to emphasize that the enterprise client remains in control of the business processes, even though an outsourcer is performing the work. But that doesn't mean the service provider can never be on the hook. A service provider could be liable for non-compliance should it breach the process so as to expose the enterprise to a claim of securities fraud. To the extent that indemnification is included in contracts, it should come with a cap on liability. Each contract will be different; there are no easy answers. It's a complicating factor that requires a great deal of attention. The act forces the partner and the customer to have an ongoing dialogue about the business.