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ACCA Strategic Professional · Strategic Business Leader · Enabling success: disruptive technologies

Corvane Logistics moved its customer systems to a single cloud provider under a standard contract. The CEO says that, as the provider is a large reputable firm, the risk of service failure is now the provider's concern. Which response best reflects sound strategic risk management?

The CEO is wrong. Corvane keeps the business risk of disruption even when infrastructure is outsourced. It should assess dependence on the provider, negotiate service level agreements and plan exit or backup options, because accountability to customers cannot be passed to the supplier.

  1. AAgree, because outsourcing the infrastructure transfers the business risk
  2. BDisagree, because the business retains risk of disruption and must assess provider dependency, exit options and service level agreementsCorrect
  3. CAgree, provided the contract is for more than five years
  4. DDisagree, because cloud computing always increases cost over in-house systems

Explanation

Outsourcing transfers operations, not accountability. Corvane still suffers customer and reputational impact if the service fails, so it needs SLAs, resilience and exit planning to limit vendor lock-in. Contract length does not remove the risk, and cost claims are not universally true.

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