Risk Management & Business Continuity Flashcards

Which procurement strategy best reduces the risk of supplier dependency in a global supply chain?

Answer: Supply base diversification across multiple suppliers and geographic regions

Diversifying the supply base across multiple suppliers and geographic regions reduces concentration risk and improves resilience against localized disruptions.

Force majeure clauses in logistics contracts primarily protect parties from liability when:

Answer: Performance failures occur due to unforeseeable events beyond reasonable control

Force majeure clauses excuse non-performance caused by extraordinary events (natural disasters, wars, pandemics) that are beyond the parties' control and could not be reasonably anticipated.

What is the primary benefit of scenario planning in logistics risk management?

Answer: It allows companies to pre-develop response strategies for various potential disruptions

Scenario planning prepares organizations to respond quickly and effectively to disruptions by developing and rehearsing responses to plausible future situations before they occur.

A major canal blockage disrupting global shipping lanes is an example of which type of supply chain risk?

Answer: Systemic or macro-level risk affecting multiple industries simultaneously

Systemic risks like major infrastructure disruptions affect multiple industries and supply chains simultaneously, creating cascading effects across the global economy.

In logistics risk management, 'risk appetite' refers to:

Answer: The amount and type of risk an organization is willing to accept in pursuit of its objectives

Risk appetite defines an organization's overall willingness to take on risk to achieve strategic objectives, guiding risk-related decision-making across all operations.

What distinguishes a risk 'mitigation' strategy from a risk 'transfer' strategy?

Answer: Mitigation reduces the probability or impact of a risk, while transfer shifts the financial burden to another party

Risk mitigation reduces either the likelihood or consequences of a risk, while risk transfer (e.g., through insurance or contracts) shifts the financial responsibility to another party.

A logistics firm conducts tabletop exercises for its business continuity plan. What is the primary purpose of these exercises?

Answer: To identify gaps and test the effectiveness of the BCP before an actual disruption occurs

Tabletop exercises simulate disruption scenarios to test whether the BCP is effective and complete, revealing weaknesses that can be corrected before a real crisis occurs.