An important component of supply chain risk management is risk rating and reporting. Risk rating involves assigning a numerical or qualitative score to each identified risk based on its likelihood and potential impact. This score can be used to rank risks and identify which ones need the most attention and mitigating efforts.
There are many ways to rate risk, however the following are some of the most popular ones:
Using a probability-impact matrix, risks are ranked according to their likelihood and potential effects on the supply chain. The ratings are then plotted in a matrix, with more emphasis being placed on situations with higher risk.
Using a risk scorecard, each risk factor is given a score based on its likely impact, likelihood, and preventative measures. The total score can then be used to prioritise risks and determine the appropriate mitigation strategy.
Once risks have been rated, they can be communicated to important stakeholders using a variety of formats, including scorecards, reports, and risk dashboards. The reporting should give a simple and understandable description of the risks, their possible effects, and any mitigation measures that have been put in place. A thorough understanding of the existing risk environment and any changes that might have an influence on the supply chain should also be given to stakeholders by effective reporting.
Key stakeholders can be informed of the risks that exist within the supply chain and empowered to take the necessary steps to mitigate those risks with the help of effective risk rating and reporting. Also, it can aid in creating a culture of risk management inside the organisation, which will increase acceptance and support for risk management initiatives.
Find out more on “Risk Rating and Reporting” on 30th May - 1st June, 2023 at the Supply Chain Risk and Resilience Forum, in Berlin, Germany so you don't feel left out in the industry!
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