Sub-Contractors
In most situations, uncertainty is an indicator of risk, which inevitably can lead to damage, loss or events that might be detrimental to a company. in most cases, companies will seek ventures that are low risk in order to minimize their potential of loss, which will lead to greater profitability. (Oracle Corporation, 2008) In the development of a new product, Research and Development, R&D, is a crucial step. Its work can be very rewarding for the company if everything is done right and the product does well on the sales floor. There are, however, a few drawbacks to R&D which can sometimes even cripple a company financially. The R&D process is very time consuming not to mention the exuberant costs associated with it. to forecast some of its expenses for R&D, the company needs risk logs, whereby all the risks associated with the process, whether financial or other are discussed. The risk log should include all that can go wrong, and what are the contingency plans that can divert the process back on to the right track. With cases where a company must hire subcontractors, whereupon, they must invest their own money in R&D as sole-source, long-term contract holders, the situation can go either way. On the one hand, the company has someone taking the financial burden off of their hands which can give the company maneuvering room to invest in other projects. On the other hand, however, one can never tell how well the R&D will be conducted, as well as delay and budgetary overruns on the part of the company. If the product is successful, then the contractors responsible will cover some of the company's R&D costs. Yet, it’s also possible that the project will not be as successful as some had hoped, and in this case the subcontractors might not be able to help the company cover its financial risk, which in the end can be disastrous for it.
