Supply Chain Management Risk Management 2 — Questions and Answers
Question 1: Which risk management strategy involves transferring supply chain risk to a third party through contracts or insurance?
- Risk avoidance
- Risk transfer (Correct answer)
- Risk mitigation
- Risk acceptance
Correct answer: Risk transfer
Risk transfer shifts financial responsibility for a risk to another party, such as through insurance policies or supplier contracts with penalty clauses.
Question 2: A company sources a critical component from a single supplier in a politically unstable region. This represents which type of supply chain risk?
- Demand risk
- Geopolitical risk (Correct answer)
- Process risk
- Environmental risk
Correct answer: Geopolitical risk
Geopolitical risk arises from political instability, trade restrictions, or conflicts in supplier regions that can disrupt supply chains.
Question 3: What is the purpose of a Supply Chain Risk Management (SCRM) plan?
- To eliminate all supply chain disruptions
- To identify, assess, and mitigate risks across the supply chain (Correct answer)
- To reduce the number of suppliers used
- To maximize profit margins in high-risk scenarios
Correct answer: To identify, assess, and mitigate risks across the supply chain
A SCRM plan provides a structured framework to proactively identify, evaluate, and respond to risks before they cause significant disruption.
Question 4: Which metric best measures a supply chain's ability to recover from a disruption?
- Order fill rate
- Time to recover (TTR) (Correct answer)
- Perfect order rate
- Inventory turnover
Correct answer: Time to recover (TTR)
Time to recover (TTR) measures how long it takes a supply chain to restore normal operations after a disruption occurs.
Question 5: A manufacturer holds 30 days of safety stock for a key raw material. This is primarily an example of:
- Risk avoidance
- Risk transfer
- Risk mitigation through redundancy (Correct answer)
- Risk acceptance
Correct answer: Risk mitigation through redundancy
Holding safety stock creates a buffer inventory that mitigates the impact of supply disruptions by providing redundant supply capacity.
Question 6: What does 'supply chain visibility' contribute to risk management?
- It eliminates all supplier risks automatically
- It enables early detection of potential disruptions across the supply chain (Correct answer)
- It reduces the need for safety stock to zero
- It guarantees on-time delivery from all suppliers
Correct answer: It enables early detection of potential disruptions across the supply chain
Supply chain visibility provides real-time data on inventory, orders, and supplier status, enabling companies to identify and respond to risks earlier.
Question 7: Which scenario best illustrates a 'demand risk' in supply chain management?
- A key supplier experiences a factory fire
- A sudden drop in customer orders due to an economic recession (Correct answer)
- A port strike delays inbound shipments
- A natural disaster disrupts a logistics hub
Correct answer: A sudden drop in customer orders due to an economic recession
Demand risk refers to unexpected changes in customer demand patterns, such as recession-driven order cancellations, that create supply-demand imbalances.
Supply Chain Management Risk Management 2
Which risk management strategy involves transferring supply chain risk to a third party through contracts or insurance?