A business may not be able to deliver orders for its customers. Machine breakdown is caused by several reasons. One of the key reasons that may cause machines to break is power overloading or overheating in a machine (Andersen 2000).
The improper maintenance also exposes a machine to the risk of breakdown. Most small businesses can not afford the cost of maintaining machines after they purchase them. Machines with moving parts should be greased appropriately. It helps in reducing friction that may occur in the moving parts. Moreover, belts should be replaced when they start showing signs of wearing off. In some cases, the small business owners overrun some of the machines that they own. This puts strain on the drives of such a machine exposing them to the risk of breakdown.
Participants of this study also revealed that their businesses were affected by the risk of employee fraud. The three most common components of employee fraud include monetary theft, physical theft, and workers’ compensation fraud. Monetary theft occurs when employees divert money into their personal accounts before it is deposited to the account of the business.
Some employees also do not record cash receipts. Some employees also set up fake vendors and pay invoices to such vendors. They end up pocketing the payment that was supposed to be given to vendors. Physical thefts occur when employees steal some of the property owned by the company. Most physical thefts are conducted on the stock of a company (Gouge 2003).
Small businesses cannot implement strict controls that will restrict the access of high value inventory. Workers compensation fraud occurs when several employees fake injuries or illnesses in order for them to be granted compensation. The participants of this study argued that employee fraud is caused by a number of factors.
One of the key factors given by most participants was that economic factors may motivate an employee to participate in fraud. Addictive behaviors, such as gambling and substance abuse, may motivate an employee to commit fraud. Personal financial distress may also cause an employee to commit fraud. Businesses may also give employees opportunities for participating in fraud. This especially happens if a company has weak internal controls making it easy for employees to commit fraud (Vagadia 2012).
The respondents of the study also revealed the fact that most small businesses face the risk of information technology. This risk arises because some businesses do not have god measures to ensure that their computers and servers are secure. In addition, data transmitted from one network to another may be at a high risk of being accessed by the unauthorized users, due to weak internal controls (Erhardt 2005).
Some of the small businesses cannot afford the costs incurred to back up their data. It exposes such businesses to the risk of the data loss in case the business losses some of its stored data. Another key information technology risk is the threat of virus attacks. Such attacks may destroy important files in a computer making a small business to face the risk of the loss of data.
All the surveyed respondents also stated that their small businesses faced legal risks. Some representatives of the small businesses stated that they had faced huge legal risks because of choosing a wrong ownership structure. The ownership structure that a small business chooses largely determines the type of investors it can accept in order to expand its financial base. In addition, they will determine tax liability that will face them in case they fail to comply with all the tax requirements (Weth 2007).
Most small business owners may not know the legal requirements that are necessary before the formation of any business. It shows that they may suffer many risks because of this. Another key legal risks that face small businesses is a lack of maintaining proper records. Most small businesses owners may not know the records that are required to be maintained by the law (Sparrow 2003).
It may be hard for these companies to conduct a good audit if they do not maintain proper records. This shows that small businesses should do everything possible in order to minimize legal risks since it may affect their operations. The small business owners also stated that sometimes the big companies engage in an unfair competition through false advertising. In some instances, the large corporation spread false information concerning products that are produced by small scale businesses. In other instances, the large corporations may include hidden costs in their products to so that the other people think that they are cheap (Reuvid 2012).
Most of the respondents who have small scale businesses in Singapore stated that the major risk that affected their operations were a high and unfair competition that comes from large enterprises. The interviewed respondents stated that although the government of Singapore had implemented strategies that directed at ensuring that the risk of unfair competition did not affect small businesses, big companies were not keen on observing these risks (Reuvid 2012).
Most of the interviewed respondents stated that their businesses would survive better if the high competition affecting them were managed better. The small businesses stated that the large corporations participated in an unfair competition by infringing their copyrights. Copyright infringement occurs when a certain company uses the authorized works of another company. The rights that may be infringed include right to distribute a certain product, the right to produce a certain product, and the right to spread information that is contained within copyrighted works of a producer.
The respondents were also required to give their opinion on whether they considered people were doing enough in order to prevent business risks from affecting their operations. Most of the respondents argued that small businesses do not manage their risks well since most of them lack enough funds to implement successful risk management programs.
Most respondents stated that the implementation of a successful risk management program can help to minimize the number of risks that a firm faces. The first step involved in implementing a risk management program is identifying all the risks faced by a company. These risks can be classified, due to forces of nature, high competition, and breakdown of the equipment if a company.
The next step is quantifying all the risks that a small business faces. Methods for quantifying risks include calculating the loss of income that a company can suffer in case certain risk affects it. In addition, small businesses should also consider the loss of income that they will suffer before they are able to mitigate a particular risk.
The following step is formulating the necessary steps that are required in order to mitigate a particular risk. All strategies should be geared towards minimizing the chance of a particular business risk from occurring. The next step is implementing all the required strategies that will ensure a particular risk is mitigated. The last step of formulating a risk management system is monitoring the risk containment tasks. This will help in ensuring that all the risks that identified by a particular risk management program are tackled effectively.
Some of the interviewed respondents stated that they would manage their risks more efficiently if they had the required funds to hire consultancy firms. This is because consultancy firms have the necessary expertise and resources to tackle risks effectively. Risk management can also be carried out effectively by using computer aided software assigned with the task of managing such risks.
Small business may also purchase insurance cover in order to manage some of the risks that may be affecting them. Most businesses prefer to take a liability insurance cover in order to insure the contents that are present in the business where they conduct their operations (Coleman 2012).
Businesses can also incuse themselves against employee theft, and it will prevent them from incurring major financial losses, due to theft from the company employees. The participants of the survey proposed several initiatives that companies can adopt in order to avoid any risks that may be affecting them. They classified information technology risks that may affect a company as follows: cyber security threats, technology failure, physical threats, and user errors.
A technological failure occurs when a computer crashes or hard disk starts having failures. A company loses critical data, therefore hampering its overall operations, due such failures. Physical threats may also affect the data stored in the information technology components of a company (Chew 2008).
This may cause people to have unauthorized access of the critical data stored in the storage systems of a company. The participants of the survey revealed that most information technology risks could be reduced if all small scale businesses in Singapore formulated good reduction plans of information technology risks. These plans would help the businesses identify all the risks that may affect them in order to formulate strategies to minimize them (Sparrow 2003).
After a company identifies all the risks that may affect its operations, it is critical for the management to put appropriate controls in order to mitigate such risks. Formulation of risk management strategies can also enable a company to mitigate all the risks that may be facing it. The participants of the study also highlighted other risks that may influence their businesses.
These risks include safety risks that may cause employees to suffer from injuries while they operate the machinery of a small business. Other risks that the participants pointed out include the risk of the inventory of a business being stolen. It will cause such companies to incur huge expenditure while replacing this inventory.
Prevalence of Outsourcing in Singapore
According to research, one of three small businesses in Singapore receives a tax penalty of about $ 800, due to wrong tax calculations. The outsourcing of payroll activities can help a company to avoid risks since the company given the task of performing such services tracks any changes in the tax regulations. It makes them avoid the risk of facing penalties. In addition, companies given the task of handling payroll services are able to submit all the employment tax reports on time. It will assist a company to avoid penalties caused by late submissions (Mclvor 2010).
One of the key advantages that all the survey respondents gave was that outsourcing would help the small businesses to share the risks that affected their operations. In addition, the respondents stated that the business process outsourcing would make a business to reduce its operational and recruitment costs. Thus, most of the respondents recommended the business process outsourcing to companies in order for these companies to reduce some of the risks that may be affecting their business operations (Gouge 2003).
The respondents also stated that it is advantageous for a company to conduct the business process outsourcing since it enables the management of firms to concentrate on its core processes instead of the supporting processes. This will make a company avoid risks that it would have incurred if it had conducted processes that it was not highly qualified to perform (Khan 2008).
However, the respondents of the survey also stated the risks that they feared would occur if a company outsourced its activities. One of these things is that a company can lose its risk of exposing its confidential data. When a company outsources its payroll activities, there is a very high possibility that the company given the task of handling the payroll activities may know confidential information about this company.
Although some of the employees stated that outsourcing enables a company to avoid the risk of facing financial difficulties, it may end up increasing the costs incurred by small businesses. Outsourcing may make a business incur significant costs while signing offshore contracts (Vagadia 2012).
If a company outsources its marketing department, there is a very high risk that the new company handling its outsourced activities may fail to lack customer focus. This is because there is a risk that a company conducting outsourcing activities may have many clients making it hard for them to focus on a single company.
The respondents argued that they would prefer the use of knowledge process outsourcing in order to minimize the business risks that faced them. In the knowledge process outsourcing, the small business would hire a company with highly knowledgeable employees to give them advice on the critical things to be performed by a firm if these things required a constant change in knowledge. Most small businesses would benefit from offshore research, which is very common in India. This country has many graduates that have all necessary skills that can help a company (Weth 2007).
3. Impact of Outsourcing in Reducing Risks that Small Businesses Face in Singapore
Overall, this survey has revealed that small businesses in Singapore face many risks. However, most of these risks can be reduced if the small businesses in this country outsource their services to other companies, offering outsourcing services. Countries that offer outsourcing services include Philippines and India. Labor from these countries is cheap; though, the expertise offered from these countries is high.
If small scale businesses from Singapore outsource their services to these countries, they will minimize their risks. Some of the small scale businesses in Singapore make many accounting errors while keeping their books of accounts. Due to this, such companies may end up making errors while projecting their future financial needs. It is the reason why such companies end up making errors while forecasting their cash flow needs. If these companies outsource their accounting needs to offshore companies in India and Philippines, they will have the opportunity of reducing the risks of making such errors (Saxana 2009).
The knowledge process outsourcing will have a significant impact on reducing the risk of companies making significant losses because of the lack of competitiveness. Innovation is very critical for small businesses in Singapore to remain competitive. If small businesses in this country successfully seek companies having employees with expert knowledge, they will produce goods that will make them become market leaders.
In addition, outsourcing the marketing department will make small businesses in Singapore to eliminate the risk of formulating poor marketing strategies making them incur significant losses. The outsourcing marketing department will develop good promotional strategies that will enable consumers to develop strong brand loyalty towards all the brands that they may introduce in the market (Mehrotra 2005).
The business process outsourcing will also help small scale businesses in Singapore to reduce the risk of employee fraud affecting their operations. In the business process outsourcing, a company can outsource its human resource department. If a company outsources its human resource department, it will have the opportunity of providing experience of hiring employees (Duening 2005).
Before this company hires employees, it will have to interview them well. This will ensure that it hires employees who practice high ethical standards. The risk of hiring employees who may participate in employee fraud will be minimal because of this. By using business process outsourcing, a company can also outsource its maintenance department. Thus, it can reduce the risk of its machines failing.
Define the meaning of 5 key terms that you have used in this paper
Thematic Analysis Method
It is an analysis method used in qualitative research where the researcher examines any patterns that exist within any data.
It is the possibility that owners of a business will lose money when they invest in a business that has debts and inadequate cash flows to meet its objectives.
It refers to the risk of uncertainty that arises from the legal actions or interpretations of contracts.
Information Technology Outsourcing
Information technology outsourcing occurs when a company outsources its computer or internet services to another company.
It is an act of contracting a payroll company to handle all the payroll services.
4. K Summary
Chapter 4 dealt with the results of the pilot study and the survey conducted in order to determine whether the risks that small businesses in Singapore faced could be reduced by outsourcing. All the respondents of this study revealed that their small businesses faced many risks. However, they were confident that such risks could be reduced by outsourcing. They stated that outsourcing of activities helped a company to provide other companies with high expertise the task of performing the activities, which they were not highly qualified to perform. This would have helped such companies to avoid the risk of poor performance of tasks if they had chosen to perform these tasks.
5a. Discuss the limitations of the entire study from chapter 1 to 4.
This study had several limitations. One of the key limitations of this study rests on the instrument used to collect data for this research. Questionnaires were used to collect data from the participants. It is difficult to assess the emotions of respondents while collecting data using questionnaires (Click & Duening 2004).
Due to this, the researchers could not know whether the respondents of this study gave wrong responses. This shows that the results collected by this study might have been wrong, therefore not appropriate for use in data analysis. The respondents may also understand the questions in the questionnaire differently. This increases their chances of giving different responses to the same questions. This will lead to wrong analysis of the data collected from a research, increasing the chances of a wrong conclusion of a research. The researchers developed the questionnaires for this study. There is a possibility that the imposition of the researchers may have influenced them while they developed the questionnaire (Halvey & Melby 2007).
Due to this, they may have missed key data to be collected from this study. Interviews were also used in the collection of the qualitative data for this study. The use of interviews, as the method of data collection for this study, made the research experience several limitations. One of the key limitations is that it is rather difficult to obtain the accurate and reliable information in the questions when the research participants are required to give their personal opinions. This is because the opinions of the respondents might have led to wrong results of the data collected from a research. During interviews, the personal judgment of the researchers may affect the way he/she records the data collected from an interview (Tarantino 2010).
This will lead to wrong recording of the information used in a research. Another key limitation of this research is that it used participants from only four regions, such as Toa Paoyoh, Choa Chu Kang, Bedok, and Tampines. It was, therefore, necessary for the researchers of this study to take a sample for each region in Singapore in order to make this research representative. The researchers did not have enough money that would fund a research in order to cover the whole of Singapore. It is the main reason that the research did not take a sample from all regions.
This research only concentrated on whether outsourcing could reduce the risks that small businesses in Singapore faced. However, there is a very high risk that outsourcing sometimes increases the risks that small businesses face. Outsourcing has very many hidden costs, for example, fees involved during the signing of the contract (Fragnaiere & Sulivan 2006).
Such fees will increase the chances of a business facing cash flow problems. If an offshore company is contracted to manufacture certain components for a company, there is also a high risk that the new manufactured components may not match the quality of the previous components produced by this company. It shows that outsourcing may end up increasing the chances that a company may get low quality products.
Several things can be recommended considering the results that were collected from this study. One of the key things that can be recommended from this study is encouraging small businesses in Singapore to adopt outsourcing. It can be achieved by conducting a massive public campaign that will enable the small businesses located in Singapore to see how outsourcing will cause a reduction business risks that affect their overall operations.
Companies that want to start offering outsourcing services to the small businesses in Singapore can also be given subsidies by the government (Dobson & Hietala 2011). If they are given enough subsidies, they will lower the outsourcing fees that they charge the consumers from Singapore. This will encourage small businesses in Singapore to consider outsourcing their activities. Outsourcing would help small businesses owner to handle their accounting tasks despite the fact that they may not have sufficient accounting knowledge regarding how to do accounting functions of a company.
Another key recommendation, which can be taken from this study, is that the government of Singapore should formulate strategies that will ensure big corporations not to practice the unfair competition. Examples of such regulations are taking legal actions towards all corporations that engage in the unfair competition (Sparrow 2003).
If these legal actions are enforced on large companies, they will not participate in the unfair competition, thus making the small-scale companies survive. It is also necessary for the small scale businesses to formulate a risk management plan. Such a plan is important due to several reasons. It helps to assure the small businesses that they will be able to implement an effective plan in case they are faced with a risk.
This will help them to avoid the chance of suffering massive losses because of a risk. In addition, a good risk management plan will enable all the companies to develop strategies that they can use in order to confront all the risks that they may face. Good risk management programs also help companies to become confident that they will not spend many funds in case they are affected by a uncertainty (Reuvid 2012).
Efficient management of resources will ensure that a company does not lose many of its assets when it faces any uncertainty. Replacing such assets would cause a company to incur many funds. If all small businesses in Singapore implement successful risk management programs, they will avoid legal liabilities that may be brought about by breaking laws or contract agreements. In addition, the reputations of the small businesses will improve since they will be able to deliver all the products of their consumers on time. The level of brand loyalty among consumer products will also increase because of this.
5c. Further research area
Further research should be conducted in several areas. One of the key areas that need research is how small scale businesses can reduce the risks of outsourcing. Previous research has suggested several methods that businesses can adopt in order to avoid outsourcing risks. One of the things that businesses can do is protecting themselves with non disclosure clauses while entering into an outsourcing agreement. It is especially critical in case a business heavily relies on proprietary knowledge for the performance of its services. If a company enters into such agreements, it will ascertain that all important information about its staff, third parties, and other vendors, are not easily accessible to the outside public (Wong 2009).
Further research should be conducted on the metrics that companies should adopt while defining the quality of their products or level of services that are expected when they outsource their products to outside vendors. Some scholars have suggested that companies could maintain quality if they formulated quality guidelines. The following guidelines will determine how products are supposed to be produced by the company that delivers the outsourcing services. An effective definition of quality will assure that the company receiving the outsourcing services abides by high quality standards while manufacturing products (McIvor 2005).
Future research also needs to be conducted on whether finance and accounting outsourcing are that effective on the small scale businesses. This is because most researchers argue that finance and accounting outsourcing are mostly recommended for public companies trading in the stock market. Such companies are required to certify the adequacy of their accounting control and reporting systems. However, other researchers consider that outsourcing of the accounting department of the small companies is necessary in order to enable such business to estimate the risk of underestimating the finances that they require for their overall operations (Brown & Wilson 2012).
Research also needs to be conducted on whether there are other better methods to reduce business risks in Singapore. The economy of Singapore is facing many challenges. The fall in external demand, due to the economic crisis affecting Europe, influenced the external demand of products from Singapore. Its exports reduced 10.6%. This caused the small businesses conducting export activities to incur losses. It shows that better strategies rather than outsourcing should be conducted in order to reduce the risk of small businesses incurring significant losses. The domestic demand of this country also contracted in 2012. This affected the overall commercial activities in Singapore. It shows that outsourcing cannot address the economic risks that may be affecting Singapore. Better strategies need to be applied in order to reduce such risks (Fragniere & Sulivan 2010).
5d. Overall conclusion
It is evident that the business risks in Singapore can be reduced by outsourcing the activities of small businesses. From the research conducted on the 500 participants, it was clear that small business in this country faced many risks. One of the major risks that the small businesses in this country face is financial risks. Some of the businesses in Singapore have taken huge loans in order to expand their operations.
The findings of this research could be analyzed in several ways. One of the ways that these findings could be analyzed is through correlation analysis. Correlation analysis measures the strength of the relationship of two variables that are under study. A strong correlation means the variables under study have a strong relationship while a weak correlation means that the values under study do not have any relationship. A correlation of 0.0 means that there is no relationship between the dependent and independent variable under study.
The independent variables of the study were business process outsourcing, knowledge process outsourcing, finance and accounting outsourcing and technology outsourcing. The dependent variable for this study was business risks in Singapore. The correlation co-efficient based on the results of this study was +0.8125. It shows that there is a strong relationship between outsourcing and small business risks in Singapore.
However, such businesses are not able to pay the interest rates that are charged by such loans. The participants in this study also stated that their businesses faced cash flow problems. These businesses are not able to pay their creditors on time, due to the cash flow problems. The respondents of this study also revealed that their businesses were affected with the risk of breakdown of machines.
The following risk makes the small businesses face the stoppage in production. They are not able to fulfill their customer orders on time, due to this. It affects the corporate image of such businesses. The risk of breakdown of machines is caused by several factors. Poor maintenance increases the risk of breakdown in a machine. The risk of employee fraud is also very common in Singapore. Some of the employees working in the small scale businesses in this country steal funds from their employee.
This increases the chances of failure of these businesses. Small scale businesses in Singapore also face the information technology risk. Virus attacks may affect the critical data stored in the computers of these businesses because of the information technology risk. The unauthorized users may also access information stored in the computers of these businesses because of the information technology risks. Other risks identified by the respondents of this study included high competition and legal risks.
The participants suggested several things to be done in order to reduce the risks of small businesses in this country. One of the things suggested by the participants was a formulation of a risk management strategy. It helps a company to mitigate and identify any risk that may affect its overall operations. Moreover, a risk management strategy helps a company to minimize the chances of making losses because of risks. Small businesses can also hire consultancy firms in order to reduce the chances of risks. These companies will help the small businesses learn the techniques that they can use in order to identify all the risks that may be affecting them. Outsourcing is a common practice in Singapore.
Most of the participants in this study stated that they had heard about outsourcing. In addition, they were also confident that outsourcing would manage to eliminate the business risks that affected their operations. The participants of this study stated that outsourcing of the accounting department would help a company to reduce the risk of making errors while performing their accounting transactions.
This forces these companies to make inaccurate forecasts regarding their financial needs and requirements. If a company outsources its payroll department, it will have an opportunity of concentrating on its core activities. This will reduce its chances of making losses. If a company outsources its information technology department, it will be able to reduce the risk of facing information technology risks. This is because such companies will help the small businesses to develop disaster recovery plans.
In case the documents of a company are destroyed, due to the failure of the information technology systems, the plan will enable a company to retrieve all the required information. The unauthorized access to computer files is prevented by means of restricting the number of people who have the authority of accessing computer files. The clear information system policies should also be identified.
The participants of the study revealed that business process outsourcing would enable the small businesses to develop in this country. Knowledge process outsourcing can also help the small business in Singapore to reduce all the risks that may be affecting them. Through knowledge process outsourcing, a company can reduce the risk that it may face because of the lack of innovation. It is worth stressing that this study had several limitations.
One of the limitations is that it used questionnaire the reliability of which is under question. In addition, the participants of the study were only from four regions. There is a risk that the results collected from this study may not be representative of the data on all small scale businesses in Singapore. In future, studies should be conducted to investigate whether the risks brought by outsourcing can be reduced.