Supply Chain Risk Management: Setting the Stage • 21
Prevention versus Responsiveness
Oen times we look at risk simply in terms of trying to prevent an event
from occurring versus responding aer the fact. While prevention sounds
like an ideal way to approach risk management (who would not want to pre-
vent problems?), not all risks can be predicted or anticipated, particularly
hazard risks. What we see today at best practice rms is a combination of
preventive actions wherever possible combined with responsiveness plans
that support risk resiliency. e bottom line in the prevention- versus-
responsiveness debate is that an increase in known risks favors pre- risk
preventive approaches. And an increase in unknown risks favors post-
risk response agility. How a specic company approaches risk manage-
ment will be aected by this mix of known and unknown risks.
CONCLUDING THOUGHTS
is chapter starts our journey through the evolving world of supply
chain risk management. Something to remember as we progress through
later chapters is that companies that are eective at managing risk are sup-
ported by a corporate culture and a foundation that promote a company-
wide approach to risk management. A culture that stresses risk awareness
and management must then be supported by a set of enablers and sophis-
ticated tools and techniques, and perhaps most importantly, the ability to
quantify the value of risk management eorts. When the right corporate
culture is supported by eective tools, techniques, measures, and skills,
a company can engage in thoughtful risk taking rather than being para-
lyzed by an irrational fear of risk.
Summary of Key Points
• One common perspective for dening risk simply says that risk is a
situation involving exposure to danger or loss. A broader perspec-
tive takes this a step further by adding that risk is the probability or
threat of damage, injury, liability, loss, or other negative occurrences
that are caused by external or internal vulnerabilities and that may
be avoided through preemptive action.
22 • Supply Chain Risk Management: An Emerging Discipline
• It is important to clarify the distinction between enterprise risk
management and supply chain risk management. Almost all corpo-
rate executives are aware (or should be aware) of ERM, a concept that
has been around for decades. SCRM is an evolving discipline.
• SCRM is the implementation of strategies to manage everyday and
exceptional risks along the supply chain through continuous risk
assessment with the objective of reducing vulnerability and ensuring
continuity. One way to view SCRM is to think of it as the intersec-
tion of supply chain management and risk management.
• An emphasis on SCRM is necessary today because supply chains
face many factors that result in higher risk, more so than at any time
in modern history. Some of these risk factors are self- inicted; some
are not.
• A working knowledge of some important risk concepts is essential
when talking about SCRM, including what is a risk event, risk expo-
sure and vulnerability, risk governance, risk resilience, risk appetite,
risk compliance, risk response plan, and risk assessment and analysis.
• While various frameworks are available to categorize the domain
of supply chain risk, no standard agreement exists regarding what
these categories should be. A logical way to look at risk is to consider
the four categories that have dened enterprise risk management for
many years—strategic, hazard, nancial, and operational risks.
• Literally hundreds of activities and approaches have the poten-
tial to be part of a company’s risk management portfolio. At a very
high level we can organize these approaches by their primary risk
objective(s), which includes mitigating, avoiding, preventing, accept-
ing, or sharing risk.
• When the right corporate culture is supported by eective tools,
techniques, and measures, a company can engage in thoughtful risk
taking rather than becoming paralyzed by an irrational fear of sup-
ply chain risk.
ENDNOTES
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3. Blair, Gary Ryan. as quoted in www.brainyquote.com.
Supply Chain Risk Management: Setting the Stage • 23
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12. Industry Week risk study. May 2011.
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Firms Fled Risk.” e Wall Street Journal, May3, 2013: A7.
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