Deck 8: Outsourcing and Risk Management

Question 1

Which of the following best explains the concept of 'outsourcing'? 

A) Transferring activities that were previously conducted in-house, to a third party. 
B) Transferring activities to a third party. 
C) Transferring activities that were previously externally, to another third party. 
D) Transferring activities from one section of the organization to another.

Answer 1

  A

Question 2

Which of the following best explains the concept of 'onshoring'? 

A) Transferring activities that were previously conducted in-house, to a third party in the same country as the customer organization. 
B) Transferring activities that were previously conducted in-house, to a provider in a low-cost country. 
C) Transferring activities that were previously externally, to another third party. 
D) Transferring activities from one section of the organization to another.

Answer 2

  A

Question 3

Which of the following is a disadvantage of outsourcing? 

A) Freeing up cash. 
B) The risk of leakage of confidential information. 
C) Increased flexibility. 
D) Optimising usage of experience of third party.

Answer 3

  B

Question 4

Which of the following best explains the concept of 'partial outsourcing'? 

A) Transferring part of an integrated function previously conducted in-house, to a third party. 
B) Transferring activities to a third party. 
C) Transferring activities that were previously externally, to another third party. 
D) Transferring activities from one section of the organization to another.

Question 5

Which of the following is a strategic reason for 'outsourcing'? 

A) To improve customer satisfaction. 
B) To reduce costs. 
C) To develop partnerships. 
D) To improve performance.

Question 6

In many case 'offshoring' is concerned with outsourcing of which of the following? 

A) Marketing. 
B) Manufacturing. 
C) Catering. 
D) Services.

Question 7

Which of the following best explains 'capacity-related outsourcing'? 

A) The company has insufficient capacity to undertake the required activity. 
B) The company does not have the expertise to perform the required activity. 
C) The company cannot deliver the required D) The company does not have the money to carry out the required activity.

Question 8

Which of the following is an option when considering outsourcing? 

A) To consult staff. 
B) To consult suppliers. 
C) To do nothing. 
D) To maintain activity and invest.

Question 9

Which of the following is a variable that should be taken into account when outsourcing? 

A) The location of the suppliers. 
B) The delivery schedule. 
C) The cost. 
D) The level of competitiveness relative to suppliers.

Question 10

Which of the following is a tactical reason for 'outsourcing'? 

A) To improve customer satisfaction. 
B) To free up internal resources. 
C) To develop partnerships. 
D) To gain access to resources that are not available internally.

Question 11

Which of the following best explains 'turnkey outsourcing'? 

A) Responsibility for the execution of the entire outsourced function lies internally. 
B) Responsibility for the execution of part of the outsourced function lies with the external provider. 
C) Responsibility for the execution of the entire outsourced function lies with the external provider. 
D) Responsibility for a small part of the outsourced function lies with the external provider.

Question 12

Who is responsible for the coordination of 'partial outsourcing'? 

A) The organization contracted to provide the function (supplier). 
B) The buyer. 
C) Both parties (buyer and supplier). 
D) A third (neutral) party.

Question 13

Which of the following is an option when outsourcing? 

A) To collaborate and maintain control. 
B) To do nothing. 
C) To consult staff. 
D) To visit suppliers.

Question 14

Which of the following best explains the concept of 'nearshoring'? 

A) Transferring activities that were previously conducted in-house, to a third party in the same country as the customer organization. 
B) Transferring activities that were previously conducted in-house, to a provider in a nearby low-cost country. 
C) Transferring activities that were previously externally, to another third party. 
D) Transferring activities from one section of the organization to another.

Question 15

Which of the following best explains 'expertise-related outsourcing'? 

A) The company has insufficient capacity to undertake the required activity. 
B) The company does not have the expertise to perform the required activity. 
C) The company does not have the time to carry out the required activity. 
D) The company does not have the space to carry out the required activity.

Question 16

Which of the following is a variable that should be taken into account when outsourcing? 

A) The strategic importance of a specific competence to the company. 
B) The location of the suppliers. 
C) The delivery schedule. 
D) The cost.

Question 17

Which of the following is a strategic reason for 'outsourcing'? 

A) To free up internal resources. 
B) To reduce costs. 
C) To improve performance. 
D) To gain access to resources that are not available internally.

Question 18

Which of the following best explains the concept of 'offshoring'? 

A) Transferring activities that were previously conducted in-house, to a third party. 
B) Transferring activities that were previously conducted in-house, to a provider in a low-cost country. 
C) Transferring activities that were previously externally, to another third party. 
D) Transferring activities from one section of the organization to another.

Question 19

Which of the following is a tactical reason for 'outsourcing'? 

A) To improve customer satisfaction. 
B) To reduce costs. 
C) To develop partnerships. 
D) To gain access to resources that are not available internally.

Question 20

Which of the following best explains 'turnkey outsourcing'? 

A) Responsibility for the coordination of the entire outsourced function lies internally. 
B) Responsibility for the coordination of part of the outsourced function lies with the external provider. 
C) Responsibility for the coordination of the entire outsourced function lies with the external provider. 
D) Responsibility for a small part of the outsourced function lies with the external provider.

Question 21

Which of the following is an advantage of outsourcing? 

A) Increased dependence of suppliers. 
B) The risk of leakage of confidential information. 
C) Increased flexibility. 
D) Risk of losing essential strategic knowledge.

Question 22

Which of the following is a factor influencing the level of transaction costs? 

A) Frequency of the transaction. 
B) The payment terms. 
C) The profit margin. 
D) The cost of the lump sum contract.

Question 23

Which of the following describes the action that should be taken in relation to core competences? 

A) Core competences should be passes on to suppliers. 
B) Core competences should be shared with competitors. 
C) Core competences should be closely protected and are not to be outsourced. 
D) Core competence should be outsourced.

Question 24

Which of the following is a distinct phase of the outsourcing process? 

A) The strategic phase. 
B) The tactical phase. 
C) The evaluation phase. 
D) The withdrawal phase.

Question 25

Which of the following is not an element in the performance management stage of outsourcing? 

A) Supplier report card. 
B) Supplier validation. 
C) Confidentiality agreement. 
D) Continuous improvement.

Question 26

Who should manage outsourcing processes and projects? 

A) Business Managers. 
B) Consultants. 
C) Procurement managers. 
D) Accountants.

Question 27

Which of the following is an element in the 'transaction cost approach'? 

A) Arriving at the lowest cost possible for each transaction. 
B) Provision of unique value to the customer. 
C) The decision to outsource. 
D) The evaluation of the suppliers.

Question 28

Which of the following is a distinct phase of the outsourcing process? 

A) The withdrawal phase. 
B) The tactical phase. 
C) The evaluation phase. 
D) The transition phase.

Question 29

Which of the following is an element in the 'transaction cost approach'? 

A) Arriving at the lowest highest possible quality for each transaction. 
B) Provision of lists of approved suppliers. 
C) Comparing whether to perform an activity internally or outsource the activity in the market. 
D) Concentrate resources on a set of core competencies.

Question 30

Which of the following is an advantage of outsourcing? 

A) Increased dependence of suppliers. 
B) The risk of leakage of confidential information. 
C) Increased flexibility. 
D) Risk of losing essential strategic knowledge.

Question 31

Which of the following is not a core competence? 

A) Skills. 
B) The level of the transaction-specific investments. 
C) Areas where the company can dominate. 
D) Elements important to the customer in the long run.

Question 32

Which of the following is an element in the 'core competence approach'? 

A) Arriving at the lowest highest possible quality for each transaction. 
B) Provision of unique value to the customer. 
C) Comparing whether to perform an activity internally or outsource the activity in the market. 
D) The evaluation of the suppliers.

Question 33

Which of the following is not an element in the audit and approval stage of outsourcing? 

A) Market research. 
B) Detailed audit. 
C) Confidentiality agreement. 
D) Approved supplier list.

Question 34

Which of the following is not an element in the identification and assessment stage of outsourcing? 

A) Market research. 
B) Competitive tendering. 
C) Preliminary assessment. 
D) Potential supplier list.

Question 35

Which of the following is not an element in the audit and approval stage of outsourcing? 

A) Market research. 
B) Detailed audit. 
C) Confidentiality agreement. 
D) Approved supplier list.

Question 36

Which of the following is an element in the 'transaction cost approach'? 

A) Arriving at the lowest highest possible quality for each transaction. 
B) Provision of unique value to the customer. 
C) Comparing whether to perform an activity internally or outsource the activity in the market. 
D) The evaluation of the suppliers.

Question 37

Which of the following is a distinct phase of the outsourcing process? 

A) The planning phase. 
B) The operation phase. 
C) The evaluation phase. 
D) The withdrawal phase.

Question 38

Which of the following best explains 'lump sum contract'? 

A) Contract is based on a fixed price for executing the project. 
B) A one off payment. 
C) Payment by instalments. 
D) Variable payments.

Question 39

Which of the following is not a factor influencing the level of transaction costs? 

A) Frequency of the transaction. 
B) The level of the transaction-specific investments. 
C) The internal and external uncertainty. 
D) The cost of the lump sum contract.

Question 40

Which of the following is not an element in the project execution stage of outsourcing? 

A) Contract negotiation. 
B) Order issue. 
C) Confidentiality agreement. 
D) Kick-off meeting.

Question 41

Which of the following is not a risk factor? 

A) Unavailability of qualified staff. 
B) Independent evaluation. 
C) Occurrence of unforeseen disputes. 
D) Change of key management positions.

Question 42

Which of the following is not a core value of an outsourcing relationship? 

A) Concern for other's profitability. 
B) Mutual dependence. 
C) Trust. 
D) Commitment to continuous improvement.

Question 43

Which of the following is not a supporting factor of an outsourcing relationship? 

A) Concern for other's profitability. 
B) Professional respect. 
C) Commitment to continuous improvement. 
D) Investment of effort by top management.

Question 44

Which of the following should be a feature of an Outsourcing Service Level Agreement (SLA)? 

A) It should never be updated. 
B) It should reflect the overall business goals. 
C) It should allow for the supplier to make changes to the SLA. 
D) It should not contain details on actions if service levels are not achieved.

Question 45

Which of the following best explains a 'commercial risk'? 

A) The potential for machinery to breakdown. 
B) The extent to which the supplier has a history of success. 
C) The uncertainty with regard to the price to be paid and the costs incurred. 
D) The extent to which the provider is trustworthy.

Question 46

Which of the following should be a feature of an Outsourcing Agreement? 

A) Term of the agreement. 
B) Supply dates. 
C) Quality assurances. 
D) Independent evaluation.

Question 47

Which of the following best explains a 'performance risk'? 

A) The potential for machinery to breakdown. 
B) The extent to which the supplier has a history of success. 
C) The chance that the supplier is not capable of doing the job it was hired for. 
D) The extent to which the provider is trustworthy.

Question 48

Which of the following is not a core value of an outsourcing relationship? 

A) Professional respect. 
B) Mutual dependence. 
C) Trust. 
D) Mutual commitment to customer satisfaction.

Question 49

Which of the following best explains a 'technical risk'? 

A) The potential for machinery to breakdown. 
B) The extent to which the supplier has a history of success. 
C) Workplace hazards. 
D) The extent to which the provider is able to provide the desired functionality and performance.

Question 50

Which of the following should be a feature of an Outsourcing Agreement? 

A) Supply dates. 
B) Termination plan. 
C) Quality assurances. 
D) Independent evaluation.

Question 51

Which of the following are contained in a 'risk assessment matrix'? 

A) Financial impact and likelihood of occurrence. 
B) Financial impact and profitability. 
C) Likelihood of occurrence and timescales. 
D) Likelihood of occurrence and location.

Question 52

Which of the following should be a feature of an Outsourcing Service Level Agreement (SLA)? 

A) It should never be updated. 
B) It should not reflect the overall business goals. 
C) It should allow for the supplier to make changes to the SLA. 
D) It should be comparable against pre-determined criteria.

Question 53

What is the most important issue in contract negotiations? 

A) The price. 
B) The quality. 
C) The contract. 
D) Delivery dates.

Question 54

Which of the following is not a supporting factor of an outsourcing relationship? 

A) Developing a personal relationship. 
B) Professional respect. 
C) Commitment to continuous improvement. 
D) Trust.

Question 55

Which of the following is not a risk factor? 

A) Unavailability of qualified staff. 
B) Materials shortages. 
C) Occurrence of unforeseen disputes. 
D) Exchange rates.

Question 56

Which of the following should be a feature of an Outsourcing Agreement? 

A) Conflict resolution. 
B) Supply dates. 
C) Quality assurances. 
D) Independent evaluation.

Question 57

Which of the following should be a feature of an Outsourcing Agreement? 

A) Supply dates. 
B) Quality assurances. 
C) Rates, fees and incentives. 
D) Independent evaluation.

Question 58

Which of the following is not a core value of an outsourcing relationship? 

A) Shared goals and objectives. 
B) Mutual dependence. 
C) Trust. 
D) Independent evaluation.

Question 59

Which of the following should be a feature of an Outsourcing Service Level Agreement (SLA)? 

A) It should never be updated. 
B) It should allow for the supplier to make changes to the SLA. 
C) It should be objective. 
D) It should not contain details on actions if service levels are not achieved.

Question 60

Which of the following should be a feature of an Outsourcing Service Level Agreement (SLA)? 

A) It should be measurable. 
B) It should not reflect the overall business goals. 
C) It should allow for the supplier to make changes to the SLA. 
D) It should not contain details on actions if service levels are not achieved.

Question 61

Which of the following is not part of the essence of making sound outsourcing decisions? 

A) Buying cheaply. 
B) The change in risk profile. 
C) Careful analysis of the expected operational benefits. 
D) Careful analysis of the expected cost economies.