Supply Chain Risk Management Flashcards

A company keeps extra inventory of a critical component to absorb a possible supplier disruption. Which risk response strategy is this?

Answer: Risk mitigation

Holding buffer stock lowers the impact of a disruption, so it is a mitigation response.

Buying business interruption insurance to cover losses from a factory fire is an example of which risk response?

Answer: Risk transfer

Insurance moves the financial consequences of the risk to a third party, which is risk transfer.

In a risk probability-impact matrix, which event should usually be given the highest priority?

Answer: High probability, high impact

Events that are both likely and severe carry the greatest expected exposure and are addressed first.

Which term describes the amount of risk an organization is willing to pursue or accept to meet its objectives?

Answer: Risk appetite

Risk appetite is the overall level of risk an organization is willing to take on to reach its goals.

After mitigation actions are in place, the risk that still remains is called:

Answer: Residual risk

Residual risk is the exposure that is left after risk responses have been carried out.

A firm decides to stop sourcing from a region with frequent political unrest and moves all purchasing elsewhere. This is best classified as:

Answer: Risk avoidance

Removing exposure to the source of risk altogether is avoidance.

Which document is mainly used to record identified risks, their owners, ratings, and planned responses?

Answer: Risk register

A risk register is the central log of identified risks, their assessments, owners, and responses.