MANAGEMENT

Detailed explanation-1: -One of the attractions of outsourcing is the implicit element of risk transfer. When a company undertakes a business function in-house, it has responsibility for the costs of correcting any systems failures and of dealing with their consequences.

Detailed explanation-2: -More formally, risks associated with outsourcing typically fall into four general categories: loss of control, loss of innovation, loss of organizational trust, and higher-than-expected transaction costs.

Detailed explanation-3: -The most common way to transfer risk is through an insurance policy, where the insurance carrier assumes the defined risks for the policyholder in exchange for a fee, or insurance premium, and will cover the costs for worker injuries and property damage.

Detailed explanation-4: -The best way to think about outsourcing is that it contractually transfers risk to another entity. A contract will include language like “shall assume…” and have other hold harmless provisions. For example, your organization uses software tools for a variety of tasks.

Detailed explanation-5: -By outsourcing risk management duties to someone whose background and experience is solely risk management, you can save your business a significant amount of time and money.