BCM Supply Chain Continuity & Third-Party Risk Management 2 — Questions and Answers
Question 1: What is 'concentration risk' in supply chain management?
- The risk of managing too many suppliers in one procurement category
- Over-reliance on a single supplier, region, or country for critical inputs (Correct answer)
- The danger of storing too much inventory in one warehouse location
- The risk of having too many contracts with one legal entity
Correct answer: Over-reliance on a single supplier, region, or country for critical inputs
Concentration risk refers to over-dependence on a single supplier, geographic region, or country for critical materials or services, creating vulnerability when that single source experiences a disruption.
Question 2: In supply chain BCM, what defines the maximum time allowed to restore critical supply from an alternative source after a primary supplier fails?
- Supplier Lead Time
- Recovery Time Objective (RTO) applied to the supplier relationship (Correct answer)
- Mean Time Between Failures (MTBF)
- Recovery Point Objective (RPO)
Correct answer: Recovery Time Objective (RTO) applied to the supplier relationship
The Recovery Time Objective (RTO) applied to supplier relationships defines the maximum acceptable time to restore critical supply capability, directly guiding how quickly alternative sourcing must be activated and operational.
Question 3: What does 'fourth-party risk' refer to in supply chain continuity management?
- Risk from regulatory bodies that oversee your suppliers
- Financial risk from the fourth fiscal quarter
- Risk from competitors who may disrupt your supply relationships
- Risk arising from your suppliers' own suppliers and service providers (Correct answer)
Correct answer: Risk arising from your suppliers' own suppliers and service providers
Fourth-party risk refers to risks arising from your suppliers' own suppliers and subcontractors — vulnerabilities in the extended supply chain that your organization does not directly control or have visibility into.
Question 4: Which type of contractual clause requires suppliers to maintain and test their own BCM plans as a condition of the business relationship?
- Force Majeure clause
- Business Continuity Requirements clause (Correct answer)
- Indemnification clause
- Non-Disclosure Agreement (NDA)
Correct answer: Business Continuity Requirements clause
A Business Continuity Requirements clause mandates that suppliers maintain, test, and provide evidence of their own BCM plans, effectively extending organizational resilience requirements throughout the supply chain.
Question 5: What is 'nearshoring' as a supply chain resilience strategy?
- Relocating supply chain operations to a nearby country to reduce geographic risk (Correct answer)
- Storing inventory near major customer delivery locations
- Using local port facilities to accelerate customs clearance
- Partnering with nearby competitors during supply disruptions
Correct answer: Relocating supply chain operations to a nearby country to reduce geographic risk
Nearshoring involves relocating supply chain operations to nearby countries, reducing transportation lead times, logistical complexity, and geopolitical exposure compared to far-shore sourcing while maintaining some cost advantages.
Question 6: Which risk assessment approach evaluates a supplier's financial stability, operational resilience, and BCM capability simultaneously?
- Supplier Scorecard evaluation
- Third-Party Risk Assessment (TPRA) (Correct answer)
- Net Promoter Score (NPS) survey
- ISO 9001 quality audit
Correct answer: Third-Party Risk Assessment (TPRA)
A Third-Party Risk Assessment (TPRA) evaluates suppliers across multiple dimensions — including financial health, operational resilience, and BCM capability — providing a holistic risk profile to inform sourcing decisions.
Question 7: What does 'SCRM' stand for in business continuity and supply chain management?
- Strategic Crisis Response Management
- Systematic Continuity Risk Mitigation
- Supply Chain Risk Management (Correct answer)
- Supplier Continuity and Recovery Matrix
Correct answer: Supply Chain Risk Management
SCRM stands for Supply Chain Risk Management, the discipline encompassing identification, assessment, treatment, and monitoring of risks across the entire supply chain network to protect organizational resilience.
BCM Supply Chain Continuity & Third-Party Risk Management 2
What is 'concentration risk' in supply chain management?