Such an analysis will help you determine
and prioritize the appropriate mitigation
steps, ranging from risk retention to risk
financing or risk transfer through insurance. A comprehensive analysis/assessment
includes studying the:
1) Vulnerabilities to disruptions;
2) Probabilities of a significant
3) Consequences of a significant to
4) Costs that are direct or insured,
indirect or uninsured, and opportunity costs relating to the disruption; and
5) Capital allocation that includes return
on equity (ROE), return on capital
(ROC), and/or revenue replacement
costs to offset foreseeable loss costs.
SUPPLY CHAIN RISK ASSESSMENT
PROCESS AND OUTCOMES
UNDERSTANDING WHERE AND HOW MUCH YOUR SUPPLY CHAIN IS VULNERABLE
Profits & Loss
Determine Critical Supplies & Suppliers
RISK ASSESSMENT QUESTIONS
A key aspect of supply chain risk management is to reduce the likelihood and severity of disruptions. Following are several key
strategic questions that should be asked to gauge
the effect of business disruptions on your company:
• What role does our company play and where does
it sit in the supply chain?
• Where in the construction life cycle are our projects
• How interconnected and interdependent is our
company to its subcontractors and/or suppliers?
• How much inventory of key products and materials is
available and do we have reliable back-up suppliers?
• Can we quantify the cost of a down day, down week,
down month, or the total cessation of our operations
for a longer duration?
• How large a loss can we sustain and remain in business?
business resiliency and continuity planning, so its management has become the responsibility of senior leadership.
The growing complexity of risk and the globalization of the
supply chain have ushered in an era where supply chain management should be integrated into enterprise risk management (ERM) for companies of all sizes. ERM cascades risk
management systems, processes, and thinking throughout the
Understanding your company’s supply chain risks and taking
steps to mitigate them could be a major strategic advantage
for consistent corporate sustainability and profitability.
Addressing supply chain risks will help ensure a resilient
enterprise which is better able to anticipate surprises, recover
from disruptions, adapt to changing conditions, and leverage
emerging opportunities. Robust supply chain management
can help you build both better projects and a more profitable
Historically, supply chain risk management has been viewed
as a function of procurement and logistics professionals.
Today, supply chain risk management is an integral tool for