Risk identification

Abstract

As a first step to managing supply chain risks, this chapter focuses on ways to identify and categorize risks. First, as a way to distinguish causes from effects, drivers from consequences, risks whose consequences are apparent soon after an incident from those whose consequences are spread over months, and risks that have already materialized from incidents that might happen in the future, we present a “butterfly” model that conceptually separates underlying causes, actual events and consequences. Second, keeping in mind who should manage supply chain risk, we categorize risks in a way that follows the supply chain organization. Most companies have different groups facing the supply side (purchasing), those working in internal processes (manufacturing, storage and internal distribution), and those facing the demand side (distribution and sales). Therefore, we categorize risk motivated by the supply chain management organization: supply risks, process risks, and demand risks.