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Questions and Answers

In the risk assessment step, what are the three parameters typically evaluated to determine the severity of a risk?

Probability, Impact, and Proximity

What are the two dimensions used to classify risks in qualitative analysis?

Probability and Impact

What type of analysis builds on the foundation created by qualitative analysis and incorporates numerical estimates of frequency or probability and consequence?

Quantitative Analysis

What is the simplest way to eliminate a risk, according to the risk avoidance strategy?

Not performing an activity that carries risk Signup and view all the answers

What is an example of risk avoidance in the context of transportation hazards?

Refusing to accept a customer's high-value freight Signup and view all the answers

In the context of freight loss or damage, how can a seller avoid risk by working on an Ex Works (EXW) basis?

By passing on all risk, costs, and responsibilities to the buyer Signup and view all the answers

What is the main difference between qualitative and quantitative risk analysis?

Qualitative analysis is rapid and cost-effective, while quantitative analysis incorporates numerical estimates Signup and view all the answers

What is the purpose of step 3 of the risk management process?

To develop proactive risk management and mitigation strategies Signup and view all the answers

What type of arrangement would a buyer want to minimize risk when purchasing goods?

Delivered Duty Paid (DDP) basis Signup and view all the answers

What is the goal of risk reduction in the risk management process?

To reduce the likelihood of a disruption and/or limit the severity of financial loss Signup and view all the answers

What is an example of a hedging strategy in risk management?

Diversification of transport activity Signup and view all the answers

What is the purpose of a buffering strategy in risk management?

To have additional resources to reduce risks related to capacity shortages Signup and view all the answers

What is an example of risk transfer in the risk management process?

Purchasing coverage from insurance companies for commercial vehicle accidents Signup and view all the answers

What is the purpose of contracting with third-party logistics service providers (3PLs) in risk management?

To transfer risk to a third party with the knowledge, capacity, technologies, and capability to mitigate some risk factors Signup and view all the answers

What is risk retention in the risk management process?

Accepting the consequences of occurrence when risks have limited potential to negatively affect the supply chain Signup and view all the answers

Why would a company choose to retain a risk?

Because the risk has limited potential to negatively affect the supply chain Signup and view all the answers

What does a robust SCM strategy enable a firm to do efficiently?

manage regular fluctuations in demand under normal circumstances regardless of the occurrence of a major disruption Signup and view all the answers

What is the main difference between robustness and resilience in SCM?

Robustness is about being strong in constitution, while resilience is about the ability to return to the original state after being disrupted. Signup and view all the answers

What is an example of an inherent physical risk in global supply chains?

longer distances and greater product handling Signup and view all the answers

What is the primary motivation behind human-caused security risks?

political, ideological, or criminal intent Signup and view all the answers

What is the first step in the risk management process?

Risk Identification Signup and view all the answers

What techniques can be used to highlight risks in the risk identification process?

brainstorming, interviews, and historical information analysis Signup and view all the answers

What is the goal of risk identification in the risk management process?

to discover, define, describe, document, and communicate risks before they become problems Signup and view all the answers

What is the ultimate goal of implementing a robust SCM strategy and risk management process?

to manage regular fluctuations in demand and potential disruptions efficiently Signup and view all the answers

What is the primary challenge in addressing risks, as observed throughout history in various countries?

The unknown unknowns tend to be the most difficult ones. Signup and view all the answers

What is a 'known known', and how does it relate to the Y2K millennium bug?

A 'known known' refers to something we are aware of and understand. The Y2K millennium bug is an example, where proactive measures were taken to control it. Signup and view all the answers

What is a 'known unknown', and provide an example?

A 'known unknown' refers to something we are aware we do not know. An example is the gap in our knowledge about the precise future impacts of climate change on specific regions. Signup and view all the answers

What does an 'unknown unknown' refer to, and provide an example?

An 'unknown unknown' refers to unexpected and unpredictable factors or events that can impact a situation because they lie outside the realm of our awareness and understanding. An example is the COVID-19 pandemic before it emerged. Signup and view all the answers

What was the impact of the foot and mouth disease in British livestock in 2001, and how did it affect other industries?

The foot and mouth disease in British livestock in 2001 resulted in damage to whole sectors of the economy, affecting the automotive manufacturers and fashion industry across Europe due to a shortage of high-quality leather. Signup and view all the answers

What is the purpose of the Container Security Initiative (CSI), and how does it enhance security?

The Container Security Initiative (CSI) pre-screens high-risk containers at foreign ports to enhance the security of cargo entering the United States. Signup and view all the answers

Why do proactive measures sometimes lead to questions about their value?

Proactive measures can lead to questions about their value if nothing goes wrong, as seen in the Y2K millennium bug example. Signup and view all the answers

What is an example of a response to an unknown unknown, and how did it impact security measures?

The 9/11 attacks were an unknown unknown, and new security measures were introduced after the event, such as the Container Security Initiative (CSI). Signup and view all the answers

What is the primary focus of risk management in terms of supply chain operations?

Visibility of demand and inventory, velocity to reduce the likelihood of obsolescence, and control of the whole supply chain operations with process coordination Signup and view all the answers

What are the nodes in the network referred to in Level 2 of the holistic approach to risk management?

Ports, factories, distribution centers Signup and view all the answers

What is the primary risk of loss in inter-organisational networks, according to Level 3 of the holistic approach?

Loss of a sole supplier or customer Signup and view all the answers

What are the types of factors considered in Level 4 of the holistic approach to risk management?

Green environmental, legal regulatory, socio-political, and geo-political factors Signup and view all the answers

What is the primary purpose of partnering, dual sourcing, and outsourcing in risk management?

To manage risk in inter-organisational networks and mitigate the loss of a sole supplier or customer Signup and view all the answers

What is the focus of Level 2 of the holistic approach to risk management?

Assets and infrastructure dependencies Signup and view all the answers

What is the primary goal of risk management in the context of supply chain operations?

To manage and mitigate risks to ensure efficient and effective supply chain operations Signup and view all the answers

What is the primary characteristic of an holistic approach to risk management?

Consideration of multiple levels and factors, including assets, infrastructure, organisations, and the macro environment Signup and view all the answers

Study Notes

Risk Management Process

Step 2 - Risk Assessment: Evaluation and prioritization of risks to determine their seriousness to the organization
- Three parameters: Probability, Impact, and Proximity
Qualitative Analysis: Provides baseline evaluation of risks, classifies risks as low, medium, or high on two dimensions – probability and impact
Quantitative Analysis: Builds on qualitative analysis, incorporates numerical estimates of frequency or probability and consequence

Risk Management Strategies

Step 3 - Risk Management Strategies: Develop proactive risk management and mitigation strategies
- Risk Avoidance: Eliminate risks by not performing activities that carry risks
- Risk Reduction: Develop practices to reduce likelihood of disruptions and/or limit severity of financial loss
- Risk Transfer: Share responsibility for risk management with trading partners or reassign risk to third parties
- Risk Retention: Accept consequences of occurrence when risks have limited potential to negatively affect the supply chain

Types of Risks

Inherent Physical Risks: Global supply chain susceptible to loss, damage, and delay problems
Human-caused Security Risks: Politically, ideologically, or criminally motivated risks, including theft, nuclear, chemical, biological, radiological, and high-explosive weapons

An Holistic Approach

Known Knowns: A "known known" refers to something we are aware of and understand, with no uncertainty
Known Unknowns: A "known unknown" refers to something we are aware we do not know, a recognized uncertainty or gap in our knowledge
Unknown Unknowns: Unexpected and unpredictable factors or events that can impact a situation because they lie outside the realm of our awareness and understanding

Levels of Supply Chain Risk Management

Level 1 – Visibility: Focus on demand and inventory, velocity to reduce likelihood of obsolescence and optimize asset utilization, and control of whole supply chain operations with process coordination
Level 2 – Assets and Infrastructure Dependencies: Considers assets, nodes in the networks, and links, with loss on links or nodes in the production/distribution and infrastructure network
Level 3 – Organisations and Inter-Organisational Networks: Views supply chain risk at inter-organisational networks, considers loss of sole supplier or customer, and trading relationships and power dependencies
Level 4 – The Macro-Environment: Views the macro environment, includes green environmental and legal regulatory changes, socio-political factors, and geo-political factors

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