Effective risk management of IT outsourcing necessitates a reliable risk assessment as well as risk treatment planning and subsequent implementation. The proposed risk assessment approach has been appeared as more practical as well as reliable than traditional statistical methods since it utilizes the experts’ risk perceptions in a subjective manner rather than objective way. In this paper, fuzzy set theory has been embedded in risk assessment process which facilitates to quantify risk ratings where both the risk impacts and likelihood of occurrence have been evaluated by experts’ subjective judgement. The perceived ITO risks and their influencing factors can easily be modeled by the developed hierarchical structure. The proposed methodology not only assesses the overall risk in IT outsourcing, its concept and procedure can also be implemented to evaluate risks in different industrial settings. The applicability of the proposed methodology has been tested through a real case study in an established Indian IT company. The unique research contribution of the current work relates to identification of important risk dimensions (effects) and their influencing factors (causes) in relation to IT outsourcing. The research presents a unique integrated hierarchical risk assessment module for providing a frame work for risk management in IT outsourcing using fuzzy set theory instead of probabilistic assessment. Use of ‘Incentre of Centroid’ method for crisp representation of fuzzy number improves the reliability of decision making. Further, systematic and logical categorization of various risk dimensions followed by action plan for risk mitigation is quite useful for the practising managers. Exploration of a risk assessment module would definitely help IT managers in understanding various risks associated with IT outsourcing and their impact on overall success of IT venture. Getting a clear knowledge on ITO risk dimensions, managers can tactfully deal with risks and finalize risk mitigation plans at corporate level. These may be helpful for ITO success. Reduction of ITO risk may enhance flexibility as well as competitiveness of IT industries against recent recession (downfall of IT sectors).