What is risk management in SCM?

• A. Identifying, assessing, and mitigating threats to supply continuity and performance.
• B. Hiring more staff to handle orders.
• C. Increasing cycle time.
• D. Lowering customer service.

Answer: (A)

Risk management in supply chain management is the systematic process of identifying vulnerabilities and threats to supply continuity and performance, evaluating how likely they are and how much impact they would have, and then putting plans in place to reduce, transfer, or avoid those risks so operations stay reliable. In practice, this means mapping the supply chain to spot where disruptions could come from—things like supplier failures, transportation delays, demand swings, or regulatory changes—assessing which risks matter most, and creating actions such as diversifying suppliers, building safety stock, designing flexible contracts, or running contingency drills to keep service levels steady even when surprises occur. The other options focus on activities that address capacity or service directly but don’t describe the proactive, structured approach to safeguarding the supply chain against uncertainty, which is what risk management is all about.