SUPPLY CHAIN RISK MANAGEMENT BLOG

Recipe for Successful Supply Chain Risk Management Ingredient 2: Definition of Risk Inventory

Feb 27, 2015    Heiko Schwarz

 


Once the focus as to which supply chains should be monitored has been defined, the company-specific risk inventory must be specified. Typically, the risk inventory is recorded in a risk scorecard that applies uniformly throughout the company. This scorecard includes all individual risks and indicators, which act as sensors for detecting risk changes. To facilitate definition of these individual risks, it helps to create theme-based clusters. For example, all aspects concerning

(1) Supply chain stability
(2) Supply disruption risks
(3) Market and cost risks
(4) Image and compliance risks
(5) Performance and quality risks

can be organized into individual areas. The decision as to which risks should be included in a risk scorecard is based on criteria such as: 

- Reflection of the corporate and procurement strategy
- Reduction to relevant risks (i.e. no “nice-to-know” information)
- Availability (is an authoritative database available?)
- Global coverage of the database

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This should not be based exclusively on the suppliers (solvency, CSR conformity, etc.); interruptions can also occur along the supply paths: Location risks such as natural catastrophes, strikes and accidents at sites, logistics hubs or warehouses often affect several suppliers at once. Furthermore, country risks that are imminently connected to suppliers and locations, for instance infrastructural, political or macro-economic risks, can affect entire markets. In practice, this results in a subset in most cases, which consists of the following risks and which can be monitored on the basis of 1-n indicators.

Examples of Supplier Risks and Indicators

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Examples of Location Risks and Indicators

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Examples of Country Risks and Indicators

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Read also:
Ingredient 1: Selection of Relevant Supply Chains


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