Question 40

Loss of control, loss of innovation, and loss of organizational trust

Outsourcing can lead to a loss of control over processes and quality, a reduction in innovation due to reliance on external partners, and a potential decline in organizational trust among employees and stakeholders. These risks highlight the complexities involved in managing outsourced relationships.

A) Loss of innovation, loss of tax protection, and higher than expected transactions cost

While loss of innovation is a valid risk associated with outsourcing, loss of tax protection and higher transaction costs are not primary concerns in the context of outsourcing. Tax implications vary greatly depending on the specific outsourcing arrangement and do not universally apply as a risk.

B) Loss of property, loss of organizational trust, and higher than expected transactions cost

Although loss of organizational trust is a pertinent risk, loss of property is not typically cited as a direct risk of outsourcing. Higher than expected transaction costs may occur, but they are not as critical as the loss of control and innovation, making this option less comprehensive.

C) Loss of control, loss of innovation, and loss of organizational trust

This option accurately captures the core risks associated with outsourcing. Loss of control can lead to challenges in quality management, while reliance on external entities can stifle innovation. Additionally, outsourcing can create a divide that affects trust within the organization, making this answer the most relevant and comprehensive.

D) Loss of control, loss of property, and loss of tax protection

While loss of control is indeed a risk, loss of property and loss of tax protection are less directly related to the outsourcing process. This option fails to address the critical aspects of innovation and trust, which are essential to the outsourcing discussion.

Conclusion

The correct answer, C, effectively identifies the significant risks of outsourcing, including the loss of control, innovation, and organizational trust. Other options either misidentify risks or omit crucial elements that are vital for understanding the implications of outsourcing. Thus, C stands out as the most accurate representation of the risks involved.