If you’re new to supply chain risk management, the first step in your journey is to understand the main phases of the risk mitigation lifecycle. Good news: There’s only three of them. 

Phase 1: Identification

The primary challenge in performing constant monitoring of risk—which is absolutely necessary for a truly comprehensive supply chain risk management program—is the overwhelming volume of data that has to be sifted through in order to identify threats.

Initial assessment of latent supply chain risk requires information from numerous third-party sources, government lists, social media and news outlets. The same applies to ongoing risk monitoring on a real-time basis for ad-hoc identification of new and emerging threats. High automation of data capture and data updates on a global scale is therefore indispensable and should be a key requirement when setting up supply chain risk management. This is the only way to make sure you’re accurately identifying all the threats to your supply chain.

Phase 2: Assessment

Identification and proactive monitoring of supply chain risk is the foundation for a comprehensive SCRM program, but alone is not a complete solution for risk management. 

What happens when a risk event occurs? The first thing you have to know is what it really means for your supply chain. To get the full picture, you should be able to classify risk objects in your supply chain (suppliers, locations, etc.) based on high, medium and low criticality. Then, when a risk event affects one of them, you’re immediately able to judge what it’s going to mean for you, and whether you need to take action.

Phase 3: Mitigation

Monitoring and assessing supply chain risk form the foundation of a comprehensive SCRM program, but without mitigation you are relegated to the role of a spectator unprepared to react to a risk event. To complete the SCRM process and minimize the effects of a risk event, a set of pre-approved preventive and reactive measures are necessary. These steps provide the basis for addressing risk in a proactive manner using appropriate measures to ensure long-term success.

Even if a risk event takes you completely by surprise, you should be able to immediately enact a plan to deal with it.

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