What is Risk Management?
Risk Management Definition
Risk management is the action or practice of making and executing actions that will mitigate the negative effects. It involves identifying a risk, evaluating the situation, and then acting or proceeding in a manner that will help the outcome become more favorable. When referring to supply chain risk management, it can relate to logistics disruptions, material availability, natural disasters, and/or other risks associated with keeping materials and product moving throughout the supply chain.
FAQs
What are some risk management examples?
Some examples of supply chain risk management include:
- Identifying alternate sources for materials
- Maintaining a safety stock in inventory
- Implementing a product lifecycle management (PLM) solution to provide your supply chain better visibility and enable more effective communication
What are the five steps in risk management process?
The risk management process involves the following steps:
- Identify the risk
- Analyze the risk
- Prioritize the risk
- Treat the risk
- Monitor the risk
*Source: https://www.lucidchart.com
What are the 4 ways to manage risk?
The four risk management methods are:
- Avoidance – Refraining from any activities that carry unacceptable risks
- Reduction– Taking the necessary steps to minimize the severity of the risk or the likelihood of it occurring
- Transfer – Transferring the risk to another party due to its financial impact. In this case, risks are usually transferred
through contracts or insurance. - Acceptance – Making a conscious, informed decision to accept the risk. This approach is viable for small risks where the cost of mitigation or transfer would be greater over time than the total losses sustained.
*Source: https://www.investopedia.com
White
Paper
Risk management is essential for product quality and compliance, particularly for highly regulated companies.
Learn key questions to ask during the product risk assessment and evaluation process and how a connected PLM and QMS system can help mitigate product and supply chain risks.