Risk & Uncertainty

Question 1

List the reasons why offshoring might increase expense uncertainty (3)

Answer 1

There may be uncertainty due to:

1) setup costs in the overseas country (due to lack of knowledge)
2) currency movements
3) wage inflation in the overseas country
4) price inflation
5) the effect on volumes of business if customers boycott the insurer as a result of setting up call centers overseas
6) changes in regulation in the overseas countries
7) changes in tax in the overseas country
8) changes in accounting procedures in the overseas country