Outsourcing, although cost-effective, could be exposing firms to greater risk, according to industry experts.

Speaking at a recent symposium on outsourcing, representatives of risk management and consultancy firms agreed that mitigating the risks in the supply chain was essential when transferring business overseas or to other providers.

Alan Braithwaite, LCP Consulting executive chairman, said: "The complexities of doing business overseas expose company revenue to whole categories of risk not present in a domestic context - supply chain difficulties, workforce exploitation issues, environmental concerns, political instability.

"Insurance offers partial protection, but brand damage and upset customers are not insurable," he added.

Phil Morris of consultant Morgan Chambers said: "Most people do not understand the true cost of outsourcing," adding that firms needed to ensure they were aware of all the potential risks of outsourcing and its effects on the entire business chain.