Question

Which of the following is a risk that a company faces when it outsources its operations?

1) The cost of labor for the outsourcing company may decline.
2) The third-party provider may not have the degree of expertise that the outsourcing company has.
3) If the outsourcing operation is too successful, the third-party provider may want to acquire the outsourcing company.
4) If the outsourcing operation is too profitable, the outsourcing company may want to acquire the third-party provider.

Answer 1

The risks that a company faces when outsourcing its operations include lack of expertise from the third-party provider, potential acquisition by the provider, and potential acquisition of the provider by the outsourcing company.

Step-by-step explanation:

When a company outsources its operations, it faces several risks. One of the risks is that the third-party provider may not have the same level of expertise as the outsourcing company. This can lead to issues with the quality of the outsourced work.

Another risk is that if the outsourcing operation is too successful, the third-party provider may want to acquire the outsourcing company. This could have implications for the control and ownership of the company.

Lastly, if the outsourcing operation is too profitable, the outsourcing company may want to acquire the third-party provider. Again, this could impact the relationship and dynamics between the two companies.