Risk in supply chain is a critical issue in organisations as failure to manage it could have negative consequence on firms performance and in some cases could lead to a firm’s demise (Mitchell, 1995). The consequence of poor risk management with regards to supply chain affects a firms forecasting, could lead to lower quality products, loss of reputation, fracture of relationship between customers, suppliers and other business partners (Cousines, et al., 2004). Mitigating these effects is therefore in the company’s interest for it to remain competitive and even stay in business, thus the need to adopt a supply chain risk management strategy (Christopher, 2005; Manuj and Mentzer, 2008).
Risk in a global supply chain can be defined as “ … the distribution of performance outcomes of interest expressed in terms of losses, probability, speed of event, speed of losses, the time for detection of the events, and frequency” (Manuj and Mentzer, 2008). Other definitions regard risk as anything that deviates you from the perfect path set out for the task.
Although all organisations are exposed to supply chain risk in one form or the other, firms that operate a globalised supply chain are more prone to higher risks as they operate in a more complex and uncertain environment as a result of political, environmental, financial, social, legal technological and other reasons (Tang and Tomlin, 2008). In a globalised supply chain, the members in the chain are geographically dispersed meaning variability and volatility could disrupt the chain due to disruptions, bankruptcies, breakdowns, macroeconomic and political changes
In the literature of supply chain, there are various classification and categorization of risks by various scholars. According to Christopher and Peck (2004) and Christopher (2005), supply chain risks can be categorized into five:
- Process risk
- Control risk
- Demand risk
- Supply risk
- Environmental risk
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