The social pressures are huge, and some of the good risk procedures are thrown by the wayside.

Richard Dunn, a former risk control chief at Merrill Lynch quoted in The Wall Street Journal on Jan. 25, 2008 about the $7.2 billion loss generated by the rogue trader at Societe Generale SA. 

Social pressures?  What is this?  High School?

As the sorry mess surrounding rogue trader Jerome Kerviel continues to unfold I can’t help but wonder why his “activities prompted questions from risk managers several times last year, but that the bank never began an investigation because his explanations defused any suspicions.”  Isn’t that like asking the fox to give you the hen house inventory report?

Outsourcing is an established fact of business life.  Manufacturing left the building decades ago being outsourced to foreign shores in search of cheap labor.  More recently the service sector has experienced similar erosion with call centers connecting us seamlessly to voices in far corners of the world. 

Most of us have experienced the joys of tech support from someone whose native language is not English.  It only amplifies the failure to communicate we’re already experiencing with an uncooperative computer screen — adding insult to injury.  So much for customer satisfaction.

While companies may be willing to forego some customer satisfaction in the name of cost savings, I wonder how many are willing to outsource their competitive edge?

In manufacturing it has often been said that innovation comes from doing.  If someone else is doing the work you fail to benefit from the innovation of practical experience — from the intellectual property that gets developed.

A recent article in the New York Law Journal explores the legal lining of the outsourcing decision.  It’s but one example how business and law are inextricably intertwined and how more legal literacy can help your business keep its competitive edge.

For more information about how to use the law for competitive business advantage see The Business Guide to Legal Literacy: What Every Manager Should Know About the Law.