Question

What is outsourcing and how does it reduce risk? Not how does it work, how does it work to reduce risk?

Answer 1

Answer: Transfer of  non core operations to the third party Service provider for production or execution or Business function means outsourcing.

Outsourcing Examples include IT Services, Logistics and Distribution Services.

It Reduces the Risk as you are handling the work to a vendor who is better than you in executing the same. For Example, a manufacturing company may not have excellence in IT and to run their operations they have outsourced their work to an IT vendor which is expert in IT. This will lead to less IT issues because of their expertise and less chances of manufacturing being stopped because of IT failure leading to less risk.