What might diversification of outsourcing sources help mitigate?

Diversification of outsourcing sources plays a significant role in risk management, particularly with regards to international outsourcing. By leveraging multiple suppliers from different geographic locations, organizations can reduce the likelihood of being adversely affected by any single point of failure, such as political instability, natural disasters, or changes in trade regulations in one country. This strategy helps ensure a more resilient supply chain, as disruptions in one region can often be compensated for by maintaining relationships with other suppliers in less volatile areas.

While innovative product development and increasing transaction costs are relevant to outsourcing strategies, they are not direct benefits of diversification. Enhancing dependencies on specific suppliers would counteract the very purpose of diversification, as it seeks to diminish reliance on any one provider. Therefore, the correct focus on mitigating risks associated with international outsourcing underscores the essential role that diversifying sources plays in strengthening supply chain robustness and stability.