Supply Chain Management Risk Management 3 — Questions and Answers
Question 1: In supply chain risk management, what is a 'risk heat map' used for?
- Tracking temperature-sensitive shipments
- Visualizing risks by likelihood and impact to prioritize responses (Correct answer)
- Mapping geographic locations of suppliers
- Monitoring warehouse temperature controls
Correct answer: Visualizing risks by likelihood and impact to prioritize responses
A risk heat map plots risks on a matrix of probability versus impact, helping teams visually prioritize which risks require the most attention.
Question 2: A company diversifies its supplier base across multiple countries to reduce dependency on any one region. This strategy is called:
- Vertical integration
- Geographic diversification (Correct answer)
- Single sourcing
- Demand pooling
Correct answer: Geographic diversification
Geographic diversification spreads procurement across multiple regions to reduce exposure to localized disruptions such as natural disasters or political instability.
Question 3: Which of the following best describes 'supply chain resilience'?
- The ability to achieve the lowest possible supply chain cost
- The capacity to anticipate, adapt to, and recover from disruptions (Correct answer)
- The use of technology to automate all supply chain processes
- The elimination of all inventory buffers
Correct answer: The capacity to anticipate, adapt to, and recover from disruptions
Supply chain resilience is the ability to prepare for unexpected events, respond to disruptions, and recover to a stable state while maintaining operations.
Question 4: What is 'tier-N supplier risk' in supply chain management?
- Risk from your direct (Tier 1) suppliers only
- Risk originating from suppliers further back in the supply chain beyond direct suppliers (Correct answer)
- Risk caused by customer tier pricing structures
- Risk related to warehouse tiering and storage levels
Correct answer: Risk originating from suppliers further back in the supply chain beyond direct suppliers
Tier-N risk recognizes that disruptions at Tier 2, 3, or deeper suppliers can cascade through the chain and impact the buying company even without a direct relationship.
Question 5: Which approach helps quantify the financial impact of a potential supply chain disruption?
- Value at Risk (VaR) analysis (Correct answer)
- ABC inventory classification
- Economic Order Quantity (EOQ)
- First In First Out (FIFO) costing
Correct answer: Value at Risk (VaR) analysis
Value at Risk (VaR) analysis estimates the maximum potential financial loss from a disruption over a defined time period at a given confidence level.
Question 6: A business continuity plan (BCP) in supply chain management primarily addresses:
- How to optimize daily procurement costs
- How the organization will maintain operations during and after a major disruption (Correct answer)
- How to negotiate better supplier contracts
- How to reduce workforce headcount during slow periods
Correct answer: How the organization will maintain operations during and after a major disruption
A BCP outlines procedures and responsibilities to keep critical supply chain operations running during significant disruptions such as natural disasters or cyberattacks.
Question 7: Which risk is specifically associated with fluctuations in foreign exchange rates affecting supply chain costs?
- Operational risk
- Currency risk (Correct answer)
- Reputational risk
- Compliance risk
Correct answer: Currency risk
Currency risk (exchange rate risk) occurs when changes in foreign exchange rates increase the cost of imported goods or reduce the competitiveness of exports.
Supply Chain Management Risk Management 3
In supply chain risk management, what is a 'risk heat map' used for?