Risk Analysis Matrix- Why is it a critical tool for assessing and managing risks?
The term ‘risk’ is defined as the probability of the occurrence of an event multiplied by its negative impact on business processes. A risk analysis matrix is an essential supply chain management tool that enables businesses to track and prioritize risks in order to develop an effective risk management strategy. It also provides a quick view of the probable risk factors gauged in terms of the likelihood of its occurrence or the severity of its consequences.
Risk Analysis Methods
Globally, risk analysis methods follow a systematic approach that helps identify possible threats to gauge the severity of their impact. Though several risk assessment methods exist, the most commonly adopted methods are briefly classified into two groups – Quantitative Methods and Qualitative Methods.
The risk analysis experts at SpendEdge prefer using qualitative risk analysis methods in the initial stages of the risk identification process. This process is comparable to creating a risk inventor, including the compilation of the risks and the collection of data related to the risk factors which are subject to protection. However, there are some principles to bear in mind while evaluating and examining the extent to which each risk factor has to be dealt with. Here’s a brief description of the two most commonly used risk analysis methods:
- Qualitative methods: This method is commonly used for critical business decision making. It can be used when the identified risk factors are not catastrophic.
- Quantitative methods: Quantitative risk analysis methods enable businesses to assign values to the risks based on the probability of occurrence.
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About the Client
The client – is a prominent player in the Indian Food Retail Market. Since its inception in the early 80’s the food retail brand has been customer-centric and is well-known for pioneering new formats and constantly innovating within the global food retail space.
Over the past few years, supply chain risk management emerged as a key challenge to the client’s operational supply chain issues. As a result, the food retail firm decided upon conducting a deep analysis of the supply chain risks by employing effectual risk analysis methods. To do so the client from the Indian food retail market wanted to develop a risk matrix to identify threats across their supply network. Consequently, they approached SpendEdge to help them overcome operational disruptions by commissioning a robust risk analysis matrix.
To help the food retail client overcome their supply disruptions, SpendEdge instigated the engagement with the development of a simple and pragmatic risk analysis framework. The adopted methods and criteria were based on the client’s pre-conditions and end goals. This risk analysis engagement was concluded with the submission of a detailed risk analysis report that included information on the potential risks, evaluated risks, and the recommended solutions.
The developed risk matrix was instrumental in developing the prerequisites for the dissemination of information pertaining to supply chain risk management throughout the client’s business units. It also enabled the food retail player to set their mark on the global food retail market by effectively managing supply chain risks through the implementation of proven supply chain risks analysis methods.
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