Economic risks
Sending government data and data processing and management overseas could pose risks to New Zealand's economic wellbeing and these may need to be weighed in the cost benefit assessment of the anticipated financial benefits of an initiative.
These risks include the threat of industrial espionage aimed at undermining or gaining advantage over the trade of New Zealand and its partners including theft of intellectual property. This type of activity can be more commonplace, harder to identify and harder to combat in foreign jurisdictions. As discussed under Big Picture Risks, the Ministry of Foreign Affairs and Trade is a source for advice on existing New Zealand Security Council sanctions or other formal protests or condemnations of another government's actions.
Other risks to New Zealand's economic wellbeing relate to the reliability of information and services that support New Zealand's trade and reputation. Compromised or unreliable services can have a detrimental effect on trusted relationships with business, consumers and governments. It must be noted that a catastrophic loss of trust in the services or data of one New Zealand government agency will almost certainly affect the reputation and effectiveness of other agencies.
Where appropriate, government agencies may also want to consider the strategic effect on New Zealand's labour force. Moving a specialised function offshore, especially when it is the only instance of this function being performed in New Zealand, could have a long term impact on New Zealand's capability in certain technical fields. In such circumstances the wider public good should be considered, perhaps with advice from the Department of Labour.
Moving large-scale operations offshore may also affect unemployment rates, the balance of trade and Crown revenue. A government agency's offshoring initiative, while not large-scale enough to have this direct effect, may provide motivation for a significant commercial operation in New Zealand to contract or move offshore. Where this risk is identified, advice should be sought from Treasury.
But: a reminder, Government procurement policy requires:
- best value for money over whole of life;
- open and effective competition;
- full and fair opportunity for domestic suppliers;
- improving business capabilities, including e-commerce capability; and;
- recognition of New Zealand's international trade obligations and interests.
Economic risks
- Failure to meet international obligations or comply with internal agreements
- Reduced economic benefit to NZ (This is balanced by FTAs, membership in APEC, OECD etc.)
- Domestic capability reduced as technical teams and knowledge move offshore.
- Balance of trade deteriorates and Crown revenue is reduced as large-scale production moves offshore
- Unemployment rates increase as producers move offshore.
- Trade advantages lost and trade relationships affected by security breaches.
Example mitigations
- Conduct all significant procurements in compliance with, where applicable, the Mandatory Rules for Procurement by Departments and other procurement advice from MED and the Auditor General.
- Domestic capability maintained by having New Zealanders closely working with the offshore provider.
- Don't move strategic intellectual property offshore
- Seek advice from the Department of Labour and Treasury.
- Ensure effective security management
