how do you manage supply chain risk

^{Six Ways to Manage Risk in the Supply Chain}

• Identify and prioritize risks. The first step in effectively dealing with any supply-chain disruption is identifying the risks that exist.
• Create risk awareness in your company. Information is power, and having employees with the right knowledge about supply-chain risks puts your company in a better position to deal with known ...
• Strengthen cybersecurity defenses. In the digital era, almost every company has its operations online. While going digital boosts your supply chain's efficiency, it also puts you at risk of cybercrime.
• Take up insurance. As part of a strategy to ensure continuity of your supply chain, an insurance policy is critical. ...
Perform due diligence when choosing your suppliers. One way to manage supply-chain risk is to have an in-depth understanding of your suppliers before contracting them.
Conduct regular reviews. The best way to strengthen your supply-chain risk management lies in constant monitoring. Review your strategies regularly, to learn what works and what needs to be improved.

How do I develop a supply chain risk management strategy?

In order to develop your own risk management strategy, it helps to first understand what supply chain risks you might face. What Are Some Supply Chain Risks? Supply chain risk management refers to the process by which businesses take strategic steps to identify, assess, and mitigate risks within their end-to-end supply chain.

What is supply chain risk management software?

The goal of supply chain risk management software (SCRM) is to reduce an organization’s vulnerability and ensure supply chain continuity by implementing strategies to manage risks based on continuous risk assessments.

How to deal with supply chain disruptions?

The first step in effectively dealing with any supply-chain disruption is identifying the risks that exist. While numerous internal and external risks can wreak havoc on operations, you need to break down every step of your supply chain to identify in detail what could go wrong.

How can you prevent environmental risk in your supply chain?

Although there’s no way to prevent environmental risk in your supply chain, you can plan for it. Supply chain risk assessment software enables you to take a proactive approach to risk management by providing you with greater visibility into the structure of your supply chain.

What is a supply chain risk management plan?

A supply chain risk management plan is a strategy used to predetermine any possible incidents to minimize disruptions to the supply chain if they were to occur. Risks can stem from previous learned experiences or from common industry incidents.

What are the 4 ways to manage risk?

There are four primary ways to handle risk in the professional world, no matter the industry, which include:Avoid risk.Reduce or mitigate risk.Transfer risk.Accept risk.

What are the five 5 methods of managing risk?

The basic methods for risk management—avoidance, retention, sharing, transferring, and loss prevention and reduction—can apply to all facets of an individual's life and can pay off in the long run. Here's a look at these five methods and how they can apply to the management of health risks.

How do you handle risk management?

Develop a plan to treat risks, so you can:identify each risk type and the level of risk to your business.suggest strategies to treat each risk.create timeframes for each strategy.decide who's responsible for specific parts of the plan.work out resources required such as money, staff and external help.More items...•

What is a risk management strategy?

A risk management strategy is a structured approach to addressing risks, and can be used in companies of all sizes and across any industry. Risk management is best understood not as a series of steps, but as a cyclical process in which new and ongoing risks are continually identified, assessed, managed, and monitored.

What are the 3 types of risk management?

There are three different types of risk:Systematic Risk.Unsystematic Risk.Regulatory Risk.

What are the 3 risk management techniques?

Retention. Spreading. Loss Prevention and Reduction. Transfer (through Insurance and Contracts)

What are the six risk management techniques?

There are six main techniques that can be used. They are avoidance, loss prevention, loss reduction, separation, duplication, and diversification.

What are the 4 types of risk?

The main four types of risk are:strategic risk - eg a competitor coming on to the market.compliance and regulatory risk - eg introduction of new rules or legislation.financial risk - eg interest rate rise on your business loan or a non-paying customer.operational risk - eg the breakdown or theft of key equipment.

Which is not one of the four ways to manage risk?

Which is not one of the four ways to manage risk?...To deny themselves.To work for what they need and want.To know that wants are often not satisfied.

What are the four common methods of risk management quizlet?

Risk Avoidance.Risk Retention.Risk Reduction.Risk Sharing.

What are the 5 main risk types that face businesses?

Here are five types of business risk that every company should address as part of their strategy and planning process.Security and fraud risk. ... Compliance risk. ... Operational risk. ... Financial or economic risk. ... Reputational risk.

Why is risk management important in supply chain?

Risk management in the supply chain has become increasingly important as companies both large and small seek to extend their global reach. Enterprises entering new markets often need to form new supplier relationships, engage with state-owned entities, and adapt to local laws and culture. The resulting complexity in the supply chain can mask a wide range of financial, regulatory, and legal risks.

How to mitigate supply chain issues?

Disputes are inevitable at each stage of the supply chain. One key to mitigating dispute-related risks and promoting smooth operations is to proactively prevent disputes from occurring or resolve them amicably if they happen. The right processes and technologies are essential for identifying sources of disagreement that might disrupt the supply chain. “You need to have people with the right communications skills and ability to not affect ongoing supply of material,” says Pearson. A mutually beneficial resolution is often the best way to maintain a relationship that not only mitigates risk but also enhances value for your company.

Why is supply chain data analytics important?

Indeed, the complexity of today’s environment has made the use of supply chain data analytics critical for identifying supply chain waste, fraud, billing anomalies, and risk patterns.

How to create value in supply chain?

Creating value in your supply chain while simultaneously mitigating risks to your company requires a coordinated effort between multiple stakeholders in the business, including supply chain and procurement personnel, legal, compliance, and finance. Vetting potential third-party relationships is a critical first step to mitigating risk to your organization, but it’s only a first step. By working together across the business, these various stakeholders can design a strategy for using third-party relationships to increase value within the supply chain. Companies that succeed can both protect their brands and drive business growth.

Why is it important to manage risk?

As your company makes strategic choices, such as expanding geographic reach and taking on the related risks, you need to effectively manage risk from beginning to end. This mindset can help your organization gain competitive advantage, maintain your brand’s reputation, and ultimately, use an understanding of risk to drive performance.

What is due diligence process?

An effective due-diligence process answers critical questions about a third-party’s business practices. For example: Does it have a strong track record for meeting contractual obligations? Do existing business relationships create any conflicts of interest? Does it observe the same high standards as your company with respect to providing safe working conditions and protecting the environment?

Is supply chain waste a cost effective approach?

Fortunately, proactive risk management in the supply chain has shown to be a cost-effective approach . Companies that indicated that they proactively manage supply chain risk spend 50 percent less to manage supplier disruptions than companies that stated that they aren’t proactive.

Why is it important to know the supply chain risk factors?

It’s important that you have a complete picture of the supply chain risk factors you’re susceptible to in order to get ahead of potential disruptions. Familiarizing yourself with any potential issues that might arise puts you in a better position to implement supply chain risk management strategies.

What Are Some Supply Chain Risks?

There are both internal and external risks that can disrupt your supply chain, so it’s helpful to understand the difference between the two.

How does the Internet of Things help in supply chain management?

For many businesses, the Internet of Things and other digital technologies play a major role in optimizing supply chain operations, but they also leave businesses exposed to cybersecurity threats, such as malware, ransomware, phishing, and hacking.

What are the risks of planning and control?

Planning and Control Risks: Planning and control risks are caused by inaccurate forecasting and assessments and poorly planned production and management. Mitigation and Contingency Risks: Mitigation and contingency risks can occur if your business doesn’t have a contingency plan for supply chain disruptions.

What are the risks of external supply chain?

Some of the top external supply chain risks include: Demand Risks: Demand risks occur when you miscalculate product demand and are often the product of a lack of insight into year-over-year purchasing trends or unpredictable demand.

What is PPRR in supply chain?

The “PPRR” stands for: Prevention: Take precautionary measures for supply chain risk mitigation. Preparedness: Develop and implement a contingency plan in case of an emergency. Response: Execute on your contingency plan in order to reduce the impact of the disruptive event.

Why is supply chain risk mitigation so difficult?

In today’s connected and digital world, supply chain risk mitigation can be difficult due to globalization and potential cyber interference. That said, there are measures you can take to reduce your business’ exposure to risk:

Your challenge

When it comes to the supply chain, every link in that chain has its own set of vendors handling different products, services, resources and budgets to manage cyber security risks. Managing risk in the supply chain might have you asking:

How we can help

NCC Group works with your team to assess the security capabilities of vendors and other key partners to provide a clear picture of the risk they represent.

What is the rational objective of procurement and supply chain leaders?

Instead, a rational objective for procurement and supply chain leaders should be to create a secure but high-performing supply chain. This is one in which risk can be minimized while value-added business relationships can flourish. Think of it as “intelligent risk management.”

What is downstream supply chain?

The downstream supply chain efficiently distributes a company’s products or services to its customers. All contracted suppliers, both upstream and downstream, must be proactively managed to minimize financial, confidentiality, operational, reputational and legal risks.

Why should ERM principles be used?

As part of initial strategic sourcing and supplier selection, ERM principles should be employed to ensure that excessive consolidation of the supplier community does not occur. Too often, aggressive sourcing groups will push to award a contract to a single-source award contractor. That works fine until a disaster occurs, such as financial failure of the supplier or a plant shutdown.

Why do suppliers need insurance?

First, it protects them from legal and financial exposure that could limit their ability to support contractual commitments. Second, it provides a buffer of protection to the procurement organization against direct or indirect claims from suppliers or other third parties that may be affected by contracted suppliers’ actions or inactions. If a contracted supplier is allowed to utilize key subcontractors in the performance of services, those firms must also be required to provide insurance coverage compliance.

What is proper diligence in operational supplier assessment reviews?

proper diligence in operational supplier assessment reviews. All five are of equal importance to making intelligent risk work. They are even effective at dealing with so-called “black swan” events that cannot be predicted using normal methods of statistical analysis.

Is there a no cost supplier risk mitigation resource?

Any procurement team that is proactively managing the three-legged stool of risk protection must have resources in place to proactively collect and knowledgeably review COIs. Fortunately , there is at least one new no-cost supplier risk mitigation resource that can do this at your supplier’s expense. This model effectively outsources these reviews to a highly skilled team of professionals without any budgetary impact. The use of that type of outsourced service is dramatically better than trusting internal staff groups to perform this type of task, and provides superior visibility to this important area of supply chain risk.

Did Apple know that an earthquake and tsunami would shut down critical component supplier manufacturing facilities in Japan during 2011?

For instance, did Apple know that an earthquake and tsunami would shut down critical component supplier manufacturing facilities in Japan during 2011? Probably not . But accounts of their prescient negotiation of protective Force Majeure language in key supplier contracts apparently guaranteed Apple first right of resumption, mitigating the effects of that black swan event.

Why is it important to manage risk in supply chain?

Every company, especially manufacturing companies with large supply chains, have the challenge of managing risk. Because of the potential for loss , it is important for organizations to mitigate, manage, and handle risk in their supply chain if they want to ensure customer satisfaction, experience greater profitability and outcompete competitors.

What is supply chain risk management?

The goal of supply chain risk management software (SCRM) is to reduce an organization’s vulnerability and ensure supply chain continuity by implementing strategies to manage risks based on continuous risk assessments. A supply chain faces all sorts of risk — organizational, operational, strategic, commercial or external factors, ...

How does volatility affect supply chain?

Volatility and inflation can disrupt a supply chain with a rapid increase of supplies, making forward-planning difficult unless an organization uses advanced forecasting software. Organizations who are looking to reduce price risks should purchase and sell hedge contracts, especially in commodity markets. They should also secure contracts ...

What are the four main channels of risk in the supply chain?

A supply chain faces all sorts of risk — organizational, operational, strategic, commercial or external factors, but there are four main channels of risk that disrupt the flow of the supply chain: price, quality, delivery, and reputation .

Why are supply chain executives apathetic?

Previous studies have found that many supply chain executives are apathetic towards managing and assessing risk. For example, none of the organizations in the study use an outside source for assessing the risk in their supply chain, yet most organizations will bring in consultants for employee management, marketing, sales, and finance.

What are the two types of quality errors in supply chain?

Nothing can bring a supply chain to a halt faster than quality. There are two types of quality errors that occur in a supply chain: human error and automation error. Organizations need to measure both of these channels if they want to assess their quality risks.

When can organizations begin brainstorming strategies to mitigate risks?

Once an organization has identified risks and given them priority, they can begin brainstorming strategies to mitigate risks.