Risk Assessment – Should the trigger be time period driven or event driven?

Most companies believe that their supply chain is constantly at risk and new risks are added in the course of evaluation. A McKinsey report (2006) also claims that though supply chain managers are aware of the impact of these risks, they are seldom prepared to handle them. It becomes necessary to assess the risks in supply chain – then it typically leads to two questions (1) How often should risks be assessed and (2) When should the risks be assessed?

Most companies have a risk assessment system in place and perform them on a quarterly or half yearly basis. Some companies perform risk assessment based on occurrence of certain events in supply chains. The best method is however a combination of both. The below are certain events which should trigger risk assessment in the supply chain

• Addition of a new supplier, customer, resource or product in the supply chain
• Major change in the companies supply chain strategy, big projects
• Due to changes or increasing uncertainty in the business environment (Competitors move, Geo political issues)
• At the juncture of major decision making like outsourcing, Make or buy etc..,