What is risk management in SCM?

• A. Identifying, assessing, and mitigating risks to supply chain continuity.
• B. Maximizing profits by cutting costs at all levels.
• C. Focusing only on internal operations.
• D. Eliminating all suppliers to simplify the chain.

Answer: (C)

Risk management in supply chain management is about identifying potential risks that could disrupt the flow of materials and products, evaluating how likely they are and how severe their impact would be, and then planning steps to prevent, mitigate, or respond to those risks. This approach looks beyond internal processes to encompass suppliers, logistics, demand fluctuations, and external events like weather, geopolitical changes, or cyber threats. The goal is to build resilience and ensure continuity of operations through actions such as dual or alternate sourcing, maintaining appropriate safety stock, flexible contracts, clear contingency plans, and ongoing monitoring of risk signals. Strategies that focus only on internal operations, chase cost-cutting at every level, or seek to eliminate all suppliers fail to address the real sources of disruption and thus aren’t true risk-management approaches.