Definition
Generally, risk can be defined as ‘the probability of an unwanted outcome happening’. Risk
management involves three key activities: risk analysis, risk assessment and risk mitigation
(CIPS: Risk Management in Purchasing and Supply Management).
Successful application
For optimal implementation, it is important to allocate risks to specific persons and/or
departments that are best placed to manage them effectively. Risk management can generally
be implemented in three phases: risk analysis, risk assessment and risk mitigation (CIPS: Risk
Management in Purchasing and Supply Management).
Steps to Successful Application
1. Risk analysis: identify potential problems and estimate their probability of occurring.
2. Risk assessment: estimate the impact of a potential supply problem (glitch or disruption) on
company operations.
3. Risk mitigation: design plans to prevent potential supply disruptions and allocate risks and
responsibilities to people/departments that will be responsible for their management