CompTIA CASP+ Practice Test

What primary risks are associated with outsourcing business functions to a third party without proper controls?

1. Increased operational costs

2. Improper handling of customer data and reputation damage

3. Reduction in job opportunities for staff

4. Improvement in service quality

The correct answer is: Improper handling of customer data and reputation damage

Outsourcing business functions to a third party can introduce significant risks, particularly regarding the handling of sensitive information. When adequate controls are not established, there is a high likelihood that customer data may be managed improperly. This could lead to data breaches, loss of confidentiality, or misuse of sensitive information, triggering a range of legal and compliance issues. Such incidents can severely damage the organization’s reputation, resulting in a loss of customer trust and potentially impacting revenue. Proper data management and security protocols are essential in any outsourcing relationship to safeguard against these risks. The consequence of inadequate data protection can extend to regulatory penalties, further tarnishing the organization's reputation in the market. The other options present different perspectives but do not address the primary risks associated with outsourcing. Increased operational costs might occur, but they do not represent the critical risk inherent in managing data improperly. The reduction in job opportunities for staff can happen as a result of outsourcing; however, it does not directly correlate with data risks. Finally, while improving service quality can be a benefit of outsourcing, it is not a risk and does not pertain to potential control failures associated with data handling.