Categorising Risks & Operational Risks

Your supply chain can be disrupted by a number of different risks. Business can be unpredictable, with a number of different risks presenting themselves at the same time. Disruption and volatility within your supply chain can affect your organisation’s ability to plan.

For example, mosquito nets you buy from a supplier in Vietnam might include insecticide from China and reagent from Italy. This means the product is already subject to potential delays in transportation or customs clearance, even before assembly has been completed. Quality of supplies could also be an issue.

Here are some of the main categories of risk that you should consider as part of your risk management process:

• • • Strategic: These are risks from the vision and direction of your organisation, and its positioning in a particular industry, market and/or geographic area.
    • Operational: These are the risks associated with your management of incoming goods to your organisation. Such as on time delivery and quality.
    • Financial: Risks from changes in exchange rates, and from financial transactions with other organisations.
    • Compliance: Risks from the need to ensure compliance with laws, regulations and policy frameworks; and the potential damage incurred by exposure of non-compliant or illegal activity.
    • Market: Risks from changes in the external supply market.
    • Technological: Risks from IT, which is always changing but also subject to systems or equipment failure, data corruption or theft, new technology ‘teething troubles’ and systems incompatibility.
    • Supply: Risks arising from unstable supply markets and shortages of the resources you need for your business. This category also includes supplier failure, supply disruption, the length and complexity of supply chains and logistics.
    • Reputational: Risks to the good name of your organisation caused by exposure of unethical, socially irresponsible or environment-damaging activity by you or your supply chain.

One of the risks is increased inventory costs as you hold additional stock to deal with all eventualities in the supply chain. In terms of the end user if there is a stockout of mosquito nets in your local community it will mean potential exposure to airborne mosquitos and disease.  The risk management process will help you decide how much stock it is prudent to hold, taking into account the extra cost.