Certified Supply Chain Professional (CSCP) Practice Exam

Which of the following describes a risk associated with outsourcing?

1. Higher quality production

2. Opportunities for training staff

3. Technology failure or theft

4. Lower overhead costs

The correct answer is: Technology failure or theft

Outsourcing can introduce various risks that organizations need to manage effectively. One significant risk is related to technology failure or theft. When a company outsources its operations to another party, it often shares sensitive information and relies on the service provider’s technology infrastructure. If that technology experiences a failure, it can disrupt operations and lead to financial losses. Additionally, there’s the risk of intellectual property theft, where confidential designs, processes, or information could be compromised if proper safeguards are not in place. By contrast, higher quality production, opportunities for training staff, and lower overhead costs are typically seen as benefits of outsourcing. While these factors might indeed enhance overall productivity and efficiency, they do not capture the inherent risks associated with outsourcing arrangements, which can include vulnerabilities around technology and data security. It’s crucial for businesses to weigh these risks against potential advantages when considering outsourcing as a strategy.