Question

When a company identifies a critical supplier&#x27;s financial instability, which risk management strategy involves establishing a secondary source of supply to ensure business continuity?

Accepted Answer

The risk management strategy of establishing a secondary source of supply to ensure business continuity is called dual sourcing. This strategy involves contracting with two or more suppliers for the same goods or services to mitigate the risk of disruption if one supplier fails. Financial instability in a critical supplier poses a supply chain risk, which is the probability of an event occurring that interrupts the flow of goods to a business. By maintaining a secondary source, the company creates supply chain redundancy, which is the deliberate inclusion of extra resources or alternative suppliers as a safety net. This ensures that if the primary supplier becomes insolvent or stops production, the company can immediately shift its procurement needs to the secondary provider without halting operations. This process is a proactive form of risk mitigation, which refers to actions taken to reduce the severity or impact of a potential threat.

When a company identifies a critical supplier's financial instability, which risk management strategy involves establishing a secondary source of supply to ensure business continuity?

The risk management strategy of establishing a secondary source of supply to ensure business continuity is called dual sourcing. This strategy involves contracting with two or more suppliers for the same goods or services to mitigate the risk of disruption if one supplier fails. Finan....

Community Answers

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When a company identifies a critical supplier's financial instability, which risk management strategy involves establishing a secondary source of supply to ensure business continuity?

The risk management strategy of establishing a secondary source of supply to ensure business continuity is called dual sourcing. This strategy involves contracting with two or more suppliers for the same goods or services to mitigate the risk of disruption if one supplier fails. Finan....

Community Answers