Outsourcing is Risky

You trust your professional service providers, but do you trust whomever they outsource your sensitive and confidential information?

It’s a good idea to be concerned about the risks of outsourcing to AI platforms or foreign service providers, particularly when it comes to breaches of confidentiality, competency, and legal protections.

• Should we be more vigilant about these practices?

I’m raising this issue because, in recent weeks, I’ve spoken with people who hired experts to assist with buying and selling small and midsize businesses. They discovered that some of their service providers were sharing highly sensitive, confidential information on AI platforms.

• Many AI platforms’ terms of service explicitly state that any information shared may no longer remain confidential, which poses a significant risk to businesses and individuals relying on these tools.

Additionally, outsourcing to foreign service providers has introduced challenges such as communication gaps due to language barriers and concerns about losing control over confidential information. In some cases, foreign entities further outsource work without disclosing this to their clients, creating a chain of subcontractors who are not bound by non-disclosure agreements (NDAs) or non-circumvention agreements.

• This lack of transparency and accountability increases the risk of data breaches and misuse of sensitive information.

Key Concerns

AI Platforms: Information shared with AI tools may no longer be confidential, as their terms of service often allow them to use or store data in ways that compromise privacy.

Foreign Outsourcing: Language barriers, cultural differences, and varying legal standards can lead to misunderstandings and inadequate protection of confidential information.

Subcontracting Risks: Foreign service providers may further outsource work without informing clients, creating a chain of untraceable and unaccountable parties who are not bound by confidentiality agreements.

Suggestions for Protecting Confidentiality When Outsourcing

Review AI Terms of Service: Before using AI tools, carefully review their terms of service to understand how your data will be used, stored, and shared. Avoid platforms that claim ownership or unrestricted use of your information.

Use Secure AI Tools: Opt for AI platforms that prioritize data privacy and offer end-to-end encryption or on-premise solutions to ensure your information remains confidential.

Vet Service Providers Thoroughly: When outsourcing to foreign entities, conduct due diligence to assess their reputation, competency, and adherence to confidentiality standards.

Require NDAs and Non-Circumvention Agreements: Ensure that all service providers, including subcontractors, sign legally binding NDAs and non-circumvention agreements to protect your sensitive information.

Limit Data Sharing: Share only the minimum amount of information necessary for the task at hand. Avoid providing access to highly sensitive data unless absolutely required.

Monitor Communication: Establish clear communication protocols and use secure channels to minimize misunderstandings and ensure that sensitive information is not inadvertently exposed.

Audit Outsourcing Practices: Regularly audit your service providers to confirm they are adhering to confidentiality agreements and not further outsourcing work without your knowledge.

Consider Legal Jurisdiction: When outsourcing internationally, consider the legal protections available in the service provider’s country. Choose jurisdictions with strong data protection laws and enforceable contracts.

Balance Risks and Benefits

Outsourcing to AI platforms and foreign service providers can offer cost and efficiency benefits, but it also introduces significant risks to confidentiality and data security. By taking proactive steps to vet providers, enforce legal agreements, and monitor data usage, individuals and businesses can better protect themselves from breaches and misuse of sensitive information.

Are these concerns valid, and what additional measures can be taken to safeguard confidential information in an increasingly global and AI-driven outsourcing landscape?

• Something to think about, isn’t it?

Be Smart

Properly do what you can on your own and then later outsource what’s necessary.

One of the most important things you’ll learn from me is how to know whether you need to outsource to anybody.

Don’t forget people looking over your shoulders. Like investors, family, and lenders, all of which are stakeholders for what you want to accomplish.

Missteps during due diligence frightens stakeholders.

And keeps you up all night!

Email Ted J. Leverette, The Original Business Buyer Advocate ®.

“Partner” On-Call Network, LLC

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120 Financial Lifelines for Small Businesses

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