CPM Risk Management and Mitigation Flashcards

What is 'supply chain risk' in the context of purchasing management?

Answer: The potential for disruptions to the flow of goods, services, or information across the supply chain

Supply chain risk encompasses any threat — from natural disasters to supplier failures — that could disrupt the procurement and delivery of goods or services.

Which risk mitigation strategy involves using multiple suppliers for a critical component instead of relying on one?

Answer: Dual or multi-sourcing

Multi-sourcing spreads procurement across several suppliers so that if one fails, others can continue meeting demand.

What is a 'force majeure' clause in a purchasing contract?

Answer: A provision that excuses a party from performance obligations due to extraordinary events beyond their control

Force majeure clauses protect contracting parties from liability when unforeseeable events such as natural disasters or wars prevent contract fulfillment.

What does a risk matrix help purchasing managers do?

Answer: Evaluate and prioritize risks by assessing their likelihood and potential impact

A risk matrix plots identified risks by probability and impact, helping managers prioritize which risks require the most urgent mitigation.

What is 'country risk' in international purchasing?

Answer: The potential negative impact on procurement from a supplier's country's political, economic, or regulatory instability

Country risk includes political instability, regulatory changes, economic volatility, and infrastructure issues in a supplier's country that could disrupt supply.

Which of the following is an example of a 'financial risk' associated with a key supplier?

Answer: Supplier filing for bankruptcy and being unable to fulfill orders

A supplier's financial insolvency directly threatens their ability to deliver, making it a critical financial risk in supply chain management.