What are the 9 leading risk factors that will impact the ability of your supplier to provide the goods or services that you have bought? Find out more, including how to monitor and mitigate supply chain risk, at www.procurementcareerhub.com/risk-management.

1. 9 Critical Supplier Related
Risk Factors
Develop & Grow with the PCH Library
http://www.procurementcareerhub.com/library

2. Geopolitical Risk
Country specific risks such as terrorism, weather events, natural disasters and local politics

3. Geopolitical Risk Example
A terrorist attack in a large city means that a key supplier must close their facility for an
extended period of time, as workers are not able to get to the office. As a result, you are
not able to provide timely support to your customers.

4. Concentration Risk
Over reliance on a single point of failure (e.g. supplier, sub-supplier, location, transport mode)

5. Concentration Risk Example
You are highly dependent on a single supplier because you have sourced multiple critical
goods or services from them. The supplier then requests a large cost increase that you
cannot mitigate because of the complexity of resourcing all goods or services.

6. Strategic Risk
Risk that occurs as a result of your poor decision making

7. Strategic Risk Example
You contract supplier that does not have service, but your supplier to meet your
Sourcing to awith a supplier for a good or the capability or processesdoes not have the
capability or technology to provide what you have contracted for.
requirements. This supplier used recycled boxes to store and shop customer material.

8. Reputational Risk
Negative customer or public opinion due to actions taken by you or your supplier

9. Reputational Risk Example
Hackers are able to access the credit card data of your customers due to a weakness in
the systems of your payment processor. The breach is widely reported and customers
believe you have breached their trust in you.

10. Compliance Risk
Risk that occurs when you or your supplier do not comply with laws, policies and procedures

11. Compliance Risk Example
Your supplier sub-contracts with a company that is located in a country in which your
government has sanctions, making the use of that sub-contractor illegal. Usage leads to
significant fines from your government regulator.

12. Operational Risk
Risks that occur as a result of not integrating your supplier into your internal processes

13. Operational Risk Example
You have contracted with a supplier to provide a good or service, but that decision was
not popular within your company. As a result, colleagues are not supporting your
supplier which means the supplier cannot provide the good or service as contracted.

14. Financial Risk
Risk that occurs due to the poor financial health of your supplier

15. Financial Risk Example
A major supplier files for bankruptcy, and the bankruptcy court allows them to terminate
the contract that they have with you. You must either renegotiate terms or immediately
seek alternative sources of supply.

16. Credit Risk
Your supplier decides they can no longer meet their obligations due to changing deal economics

17. Credit Risk Example
You force a fee reduction on a key supplier, which leads to compressed margins.
Therefore, your supplier must cut the cost of providing the good or service which leads to
significant reductions in quality.

18. Contractual Risk
Risks that occur because of loopholes or lack of clarity in your supplier contracts

19. Contractual Risk Example
You sign a contract for the provision of goods or services, and after a period of time you
wish to cancel the agreement. After reviewing the contract, you realize that the
termination provisions are not clear, which may lead to an unbudgeted cost to cancel.

20. For more information, including an overview of how to
manage and mitigate critical supply base risk factors, visit
the PCH Library
www.procurementcareerhub.com/risk-management

21. Images of Money
https://www.flickr.com/photos/
59937401@N07/5930175788/siz
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Dave Dugdale
https://www.flickr.com/photos/
davedugdale/5099605109/sizes/l
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jronaldlee
https://www.flickr.com/photos/
jronaldlee/4648545609/sizes/o/
Mark Fischer
https://www.flickr.com/photos/
fischerfotos/7432022562/sizes/k
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jcarbaugh
https://www.flickr.com/photos/
jcarbaugh/64190834/sizes/o/
Brandon Grasley
https://www.flickr.com/photos/
brandongrasley/8227882239/siz
es/k/
Guano
https://www.flickr.com/photos/
guano/3911266957/sizes/o/
MCS@flickr
https://www.flickr.com/photos/
skrobola/4571498936/sizes/o/
Bionic Teaching
https://www.flickr.com/photos/
bionicteaching/11338445384/siz
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Dying Regime
https://www.flickr.com/photos/
dyingregime/8474094742/sizes/
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Word Ridden
https://www.flickr.com/photos/
wordridden/4275674005/sizes/l/
thisisbossi
https://www.flickr.com/photos/
thisisbossi/3190441988/sizes/o/
libertygrace0
https://www.flickr.com/photos/
35168673@N03/4743607494/siz
es/l/in/photostream/
Stockmonkeys.com
https://www.flickr.com/photos/
86530412@N02/8449175260/
Dylan Payne
https://www.flickr.com/photos/
dylanlucaspayne/6075284122/siz
es/o/
Stockmonkeys.com
https://www.flickr.com/photos/
86530412@N02/8187154150/siz
es/k/
Images of Money
https://www.flickr.com/photos/
59937401@N07/5858030702/siz
es/o/
bmills
https://www.flickr.com/photos/
32485328@N00/7175133946/siz
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PHOTO CREDITS
Maritime Union of New Zealand
https://www.flickr.com/photos/
maritimeunion/6971557391/in/p
hotostream/