Ensuring Supply with a Best-In-Class Risk Management Plan

The top10 factors to be considered in a risk management plan to handle all kind of supply risks


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Companies operate in complex and uncertain environments with increasing risks of costly supply disruptions. These risks, from natural disasters to political upheavals, from financial crises to labour exploitation and more, require buyers to identify, monitor and constantly manage supply risks. The requirement to manage risk is now a critical skill for all buyers but what has to be considered in a risk management plan? According to a global KPMG survey, more than 80% of all companies believe they have not attained a “leading practice” level of supplier risk management. This video will provide insights to help buyers manage risk and the most common 10 factors to be considered in a risk management plan.


Risk management is the process of identifying, assessing and managing risks arising from various factors. In the 21st century, supply risk management has become a top priority not just for the Procurement organisation but for company executive management and Company  Boards. Supply disruptions, cost volatility, non-compliance, adverse publicity etc. can cause enormous damage both reputationally and financially. Supply chain risks can hide almost anywhere, externally as well as internally. External risks may lie completely outside of the direct influence of the buyer. No one can predict the next earthquake or big flood, nor can you expect to have detailed forecasts of legal and economic changes in overseas or even domestic supply markets but it is essential to understand what could potentially influence company’s operations and have a formal written recovery or mitigation plan.

There are three elements for a well-structured supply chain risk management plan:

1. Create visibility and transparency:

What is the current structure and flow of goods through the supply chain from raw material to the company’s finished goods or services?

2. Scenario analysis:

What are the possible disaster scenarios, how likely are they to happen and what is their potential business impact?

3. Rapid response: How should a buyer and category manager react to an unplanned event?

While some risks can be tolerated if the result of their assessment is low, other risks have to be proactively addressed and mitigated. Usually, one of three approaches is appropriate - risk avoidance, risk mitigation, or risk transfer.

Risk avoidance requires the elimination of any factor that gives rise to the risk. An example is to ensure only fully tested components used in a new product. Risk mitigation aims to either reduce the likelihood that a risk occurs, or minimise the negative consequences if it does occur, or both. Risk transfer is to agree with someone else, most likely your supplier, to compensate you for some or all of the effect of the risk. Last but not least, a well-structured risk management plan requires and ongoing monitoring of critical supply risk factors.

Faculty name: Don Klock
Duration: 20:50 Min.
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