CRISC Certified in Risk and Information Systems ControlGovernanceMedium
A large manufacturing company is experiencing significant disruption in its supply chain due to geopolitical events and natural disasters. This has led to production delays, increased costs, and reputational damage. The board of directors is demanding a more resilient supply chain. Which of the following governance actions is MOST critical for achieving this objective?
- ADiversifying suppliers across different geographic regions and assessing their risk profiles.
- BImplementing a new enterprise resource planning (ERP) system to improve inventory tracking.
- CEstablishing a dedicated crisis management team for supply chain disruptions.
- DIncreasing buffer stock levels for all critical components.
Show answer & explanationAnswer & explanation
Correct answer: A. Diversifying suppliers across different geographic regions and assessing their risk profiles.
Diversifying suppliers across different geographic regions and assessing their risk profiles directly addresses the root cause of the disruptions (geopolitical events, natural disasters) by building resilience through reduced single points of failure.
Why the other options are wrong
- B. An ERP system improves tracking but doesn't inherently build resilience against external disruptions.
- C. A crisis management team reacts to disruptions; while important, it doesn't proactively build resilience into the supply chain structure.
- D. Increasing buffer stock is a tactical response that can mitigate short-term disruptions but doesn't address the systemic need for supply chain resilience against varied, large-scale events.
Supply Chain Resilience
The ability of a supply chain to prepare for and adapt to unexpected disruptions, recover from them, and return to its original state or evolve to a more desirable state of performance.
- Focuses on proactive risk mitigation and adaptability.
- Involves diversification, visibility, and collaboration.
- Aims to minimize impact from events like natural disasters, geopolitical issues.
Memory trick: Don't put all your eggs in one basket, especially when the basket is global and wobbly.