Supply Chain Risk, Resilience and Continuity

Introduction and strategic context

Supply chains create value by coordinating suppliers, manufacturers, logistics providers, technology platforms, customers and regulators. The same interdependence that improves efficiency can also transmit disruption. A port closure can stop a factory hundreds of kilometres away; a cyberattack can interrupt physical production; a flood can disable a critical supplier; and a geopolitical decision can make an established trade route uneconomic or unlawful.

Supply chain risk management is therefore not merely an insurance or emergency-response activity. It is a strategic capability concerned with the systematic identification, assessment, treatment and monitoring of events that may prevent the supply chain from achieving its objectives. Those objectives include service, cost, quality, safety, compliance, sustainability and organisational reputation.

Resilience is the capability of a supply chain to prepare for disruption, absorb its effects, recover within an acceptable period and adapt to a changed environment. Continuity management converts this capability into practical arrangements: priorities, decision rights, alternatives, communication procedures, recovery targets and tested response plans.

A mature organisation does not attempt to eliminate every risk. Such an objective would be financially impossible and may reduce efficiency excessively. Instead, it decides which risks are material, how much exposure is acceptable, which controls provide value, and how much recovery capacity is required.

Learning objectives

By the end of this chapter, the learner should be able to:

1. Distinguish supply chain risk, vulnerability, disruption, resilience and continuity.
2. Map supply networks and identify operational, supplier, logistics, cyber, climate and geopolitical exposures.
3. Apply qualitative risk matrices and Failure Mode and Effects Analysis (FMEA) appropriately.
4. Evaluate mitigation options using scenario analysis, stress testing and resilience metrics.
5. Design business continuity and supply chain continuity arrangements.
6. Critically assess trade-offs between efficiency, redundancy, agility, sustainability and cost.
7. Explain governance, ethical, regulatory and technology considerations in supply chain risk management.

1. Foundations: risk, vulnerability and resilience

Risk is commonly understood as the effect of uncertainty on objectives. In supply chains, risk may involve an adverse event, an uncertain condition, or an inability to meet required performance. A useful conceptual decomposition is:

• Hazard: a source of potential harm, such as flooding, malware or insolvency.
• Exposure: the assets, processes, suppliers or flows subject to the hazard.
• Vulnerability: the susceptibility of an exposed element to harm.
• Consequence: the effect on cost, service, safety, revenue, compliance or reputation.
• Control: a measure that reduces likelihood, consequence or recovery time.
• Disruption: an event that interrupts expected supply-chain flows or performance.

Risk is not identical to uncertainty. Uncertainty may be neutral or beneficial, whereas risk concerns the implications of uncertainty for objectives. Nor is risk identical to a disruption: risk exists before the event, while disruption describes the realised interruption.

Efficiency and resilience trade-offs

Lean systems reduce waste, inventory and idle capacity, but may have limited slack. Resilient systems often require some combination of alternate suppliers, safety stock, flexible capacity, postponement, information visibility and transport options. These resources have a cost, and their value is partly contingent: they may appear unnecessary during normal operations but become highly valuable during a disruption.

The central managerial question is not whether redundancy is good in the abstract. It is whether the expected reduction in loss and improved strategic flexibility justify the cost and complexity. A single-source arrangement may be appropriate for a specialised component when the supplier is financially strong, geographically diversified and contractually reliable. It may be inappropriate when the component has no substitute and the supplier operates in a concentrated hazard zone.

Resilience dimensions

Resilience has several related dimensions:

• Anticipation: sensing threats and preparing before impact.
• Absorption: maintaining some performance during disruption.
• Recovery: restoring an acceptable operating state.
• Adaptation: learning and changing the network after disruption.
• Transformation: redesigning the network when existing assumptions are no longer valid.

Resilience should be defined against a performance objective. A supply chain that maintains 80% of normal output may be resilient for one product and inadequate for another. Critical medical supplies, for example, may have much stricter continuity requirements than discretionary consumer goods.

2. A structured risk-management architecture

A practical risk-management cycle contains six linked activities:

1. Establish context: define objectives, scope, risk appetite, critical products and stakeholders.
2. Identify risks: determine hazards, failure modes, dependencies and vulnerable nodes.
3. Analyse risks: estimate likelihood, impact, velocity, detectability and interdependence.
4. Evaluate risks: compare exposure with risk criteria and prioritise treatment.
5. Treat risks: avoid, reduce, transfer, share, accept or prepare for the risk.
6. Monitor and review: track indicators, test controls, investigate incidents and update assumptions.

This cycle should be integrated with procurement, sales and operations planning, engineering change control, information security, financial planning, environmental management and enterprise risk management. A risk register that is disconnected from operating decisions quickly becomes a compliance document rather than a management instrument.

Supply-chain mapping

A supply-chain map should represent more than tier-one suppliers. It should identify:

• material, information, financial and reverse flows;
• supplier sites, plants, warehouses, ports, carriers and distribution centres;
• product and process dependencies;
• single points of failure and shared facilities;
• geographic, legal and infrastructure dependencies;
• critical software, data, cloud and communication services;
• substitutability, lead times and recovery options.

Mapping may begin with a bill of materials and process map, then be extended through supplier questionnaires, purchase data, logistics records, site audits, open-source intelligence and digital traceability platforms. Mapping is difficult because suppliers may lack visibility beyond their own tier, commercial information may be sensitive, and networks change continuously.

A useful map distinguishes structural concentration from apparent diversification. Buying the same component from two suppliers does not provide true diversification if both depend on the same sub-tier producer, port, utility, cloud service or raw-material region.

Figure: Network mapping reveals common upstream dependencies and risk propagation.

3. Risk identification and assessment methods

Risk registers and heat maps

A risk register records the risk statement, causes, event, consequences, owner, existing controls, indicators, treatment actions, due dates and residual exposure. A clear risk statement separates cause, event and effect: “Because the sole sub-tier producer is located in a flood-prone zone, flooding may interrupt resin supply, causing production stoppage and customer delays.”

A qualitative matrix ranks likelihood and consequence, often on a scale from 1 to 5. A simple priority score is:

Here, L is the likelihood rating and I is the impact rating. The score is ordinal, not a probability or monetary value. It is valid only when rating definitions are explicit and consistently applied. A score of 20 does not necessarily represent twice the risk of a score of 10.

Impact should be multidimensional. Relevant criteria may include financial loss, customer service, safety, regulatory breach, environmental damage, data compromise and reputational harm. Where a single score hides important distinctions, a profile or separate thresholds should be used.

Failure Mode and Effects Analysis

FMEA is a bottom-up technique that examines how a process, product or service can fail. For each failure mode, the team identifies effects, causes, current controls and ratings for severity, occurrence and detection. The traditional Risk Priority Number is:

S, O and D are ordinal ratings, commonly from 1 to 10, for severity, occurrence and detection difficulty. A high D means poor detectability. The RPN is a prioritisation aid, not a statistically meaningful probability. Different combinations can produce the same RPN, and a very severe failure may deserve action even if occurrence is low. Modern FMEA practice therefore uses action thresholds, criticality categories and engineering judgement in addition to RPN.

Illustrative example. A temperature-sensitive pharmaceutical shipment has three assessed failure modes:

The documentation error has the highest RPN because it is difficult to detect before dispatch. However, refrigeration failure remains strategically critical because its severity is very high. Controls might include automated document validation, pre-clearance review, temperature telemetry and qualified backup carriers.

Bow-tie and cause–event–consequence analysis

Bow-tie analysis places a hazardous event at the centre. Preventive barriers act on the left side, while mitigating barriers act on the right. For example, for a cyber-induced warehouse shutdown, preventive barriers may include identity management, network segmentation, patching and employee training. Mitigating barriers may include offline backups, manual dispatch procedures, alternate facilities and incident communication.

Quantitative expected-loss analysis

When credible probability and consequence estimates exist, expected loss can support economic decisions:

Here, p_i is the probability of scenario i, C_i is its monetary consequence, and the summation covers mutually exclusive scenarios. Probabilities should be defined over the same time horizon, and consequences should include relevant direct and indirect effects. Expected loss does not capture risk aversion, catastrophic tail effects, strategic option value or correlated events; it should not replace scenario analysis.

4. Major categories of supply-chain risk

Operational and process risk

Operational risks arise from equipment failure, quality defects, inadequate capacity, inaccurate forecasts, labour shortages, poor procedures, unsafe work and weak maintenance. Controls include preventive maintenance, statistical process control, standard work, cross-training, capacity buffers, quality-at-source and structured problem solving.

Capacity risk is especially important when utilisation is high. A plant operating near its maximum may have little ability to absorb variability. Flexible labour, modular equipment, postponement and qualified contract manufacturers can create response capacity, but they require preparation and governance.

Supplier and financial risk

Supplier risk includes insolvency, poor quality, non-compliance, loss of capability, labour conflict and sub-tier failure. Assessment should combine financial indicators, operational performance, audit results, ownership structure, geographic exposure, business continuity maturity and dependency analysis. Supplier development is often more effective than a purely punitive approach, especially where the supplier possesses scarce technical capability.

Dual sourcing reduces dependence only if suppliers are genuinely independent and qualified. It can also increase quality variation, tooling cost and volume fragmentation. Contracts should define service levels, notification duties, audit rights, data protection, recovery expectations, allocation rules during shortages and exit or transition assistance.

Logistics and infrastructure risk

Transport risks include port congestion, carrier failure, theft, accidents, customs delays, strikes, fuel volatility and infrastructure damage. Mitigation may involve alternate ports, modal flexibility, route qualification, shipment visibility, regional distribution, inventory positioning and pre-agreed emergency capacity. Expedited transport is a recovery measure, not a substitute for network design; excessive reliance can create cost and emissions problems.

Cyber and information risk

Digital supply chains depend on enterprise systems, supplier portals, industrial control systems, electronic data interchange, cloud services and connected devices. Cyber risk can compromise confidentiality, integrity or availability. A cyber event may therefore create both information and physical-flow disruption.

Core controls include least-privilege access, multifactor authentication, network segmentation, secure backups, vulnerability management, supplier security requirements, logging, detection and response exercises. Recovery plans should specify which systems are essential, how operations continue during system unavailability, how data integrity is verified and how third parties are contacted through trusted channels. Artificial intelligence can improve anomaly detection and scenario analysis, but its outputs require validation, secure data and human accountability.

Climate and environmental risk

Climate risk has both physical and transition dimensions. Physical risks include floods, storms, heat, drought, wildfire and water scarcity. Transition risks arise from carbon regulation, changing customer expectations, technology shifts and stranded assets. Assessment should use site-specific hazard data, future climate scenarios and time horizons appropriate to asset life.

Adaptation may require elevating equipment, redesigning drainage, diversifying water sources, relocating inventory, changing materials or establishing alternate production. Organisations should avoid maladaptation—for example, protecting one facility while transferring flood risk to neighbouring communities. Climate resilience and decarbonisation should be coordinated rather than treated as competing agendas.

Geopolitical and regulatory risk

Trade restrictions, sanctions, conflict, export controls, tariffs, political instability and regulatory divergence can interrupt sourcing or make transactions unlawful. Compliance must be based on current legal requirements, not informal assumptions. Organisations need screening, classification of products and counterparties, documentation controls and escalation procedures. Ethical sourcing also requires attention to forced labour, human rights, corruption and conflict minerals.

Geographic diversification can reduce exposure to one country but may increase complexity and create new risks. “Localisation” is not automatically resilient: a local supplier may be vulnerable to the same power grid, flood, labour market or raw-material source as the buyer.

5. Mitigation and resilience strategies

Risk treatment should be selected according to the failure mechanism, not by applying generic redundancy. Major strategies include:

• Avoidance: discontinue a hazardous design, route, market or supplier relationship.
• Reduction: improve controls, maintenance, quality, security or forecasting.
• Transfer or sharing: use insurance, contracts or specialist providers, while recognising that financial transfer does not restore physical supply.
• Redundancy: add suppliers, inventory, capacity, data centres or transport options.
• Flexibility: use interchangeable components, postponement, cross-trained labour and adaptable contracts.
• Segmentation: apply different policies to critical, constrained and routine items.
• Collaboration: share forecasts, capacity information, risk signals and recovery resources.
• Learning: conduct post-incident reviews and update standards.

Inventory and time buffers

For independent, approximately normally distributed demand during lead time, a common reorder-point model is:

ROP is the reorder point in units, μ_LT is expected demand during lead time, σ_LT is the standard deviation of demand during lead time, and z is the standard-normal service-factor corresponding to the desired cycle-service level. This formula assumes a stable demand distribution, known lead-time behaviour and a chosen service definition. It should not be applied mechanically when demand is intermittent, lead times are highly disrupted or dependence and capacity constraints dominate.

Worked example. Expected demand during lead time is 1,000 units, the standard deviation is 180 units, and the target cycle-service factor is z = 1.645. Then:

ROP = 1,000 + (1.645 × 180) = 1,296.1 units.

The operational policy would normally round up to 1,297 units. The calculation provides protection against ordinary variability; it does not guarantee protection against a major port closure or supplier bankruptcy.

Stress testing and scenario analysis

Stress testing asks what happens under severe but plausible conditions. Scenarios may include a 30-day supplier outage, simultaneous port closure and demand surge, ransomware affecting order management, or a heat event that reduces regional capacity. The analysis should define:

1. baseline demand, capacity and inventory;
2. shock assumptions and duration;
3. dependencies and correlated failures;
4. decision rules and alternative sources;
5. service, cash, safety and recovery outcomes;
6. trigger points for escalation.

Sensitivity analysis varies assumptions to identify which variables drive the result. Monte Carlo simulation may be appropriate when probability distributions and dependencies are credible, but false precision is dangerous when data are sparse. Expert judgement, historical evidence and transparent assumptions are essential.

Resilience metrics

Useful measures include:

• time to detect (TTD);
• time to respond (TTRsp);
• time to recover (TTR);
• time to survive before stockout;
• percentage of critical suppliers mapped beyond tier one;
• alternate-source qualification coverage;
• fill rate during disruption;
• revenue or contribution margin at risk;
• recovery-plan exercise completion;
• cyber patching and backup restoration performance.

A resilience profile should include the performance trajectory before, during and after disruption. Recovery time alone may hide a severe service collapse. A useful conceptual measure is the cumulative performance loss over the disruption horizon:

P₀ is baseline performance and P(t) is performance at time t. The integral represents the area between baseline and actual performance, with units such as service-percentage-days. It is meaningful only when performance is measured consistently and the horizon is specified.

6. Continuity planning and crisis governance

Business continuity identifies critical activities and arrangements for maintaining or restoring them. Supply chain continuity extends this logic across external partners and physical flows. A robust plan contains:

• critical products, customers and processes;
• maximum tolerable period of disruption (MTPD);
• recovery time objective (RTO);
• recovery point objective (RPO) for data;
• minimum acceptable capacity and service;
• dependencies and alternate resources;
• roles, authority and succession;
• contact and escalation procedures;
• supplier and customer communication;
• manual workarounds and technology recovery;
• health, safety, environmental and legal requirements;
• testing, review and lessons learned.

RTO is the target time to restore a process or service. RPO is the maximum acceptable period of data loss, expressed in time. For example, an order system with an RPO of four hours requires recovery using data no older than four hours, whereas an RTO of eight hours concerns how quickly the service is restored. These are distinct requirements.

Crisis governance should establish an incident command structure with clear decision rights. A response team should not wait for perfect information. It should make decisions using known facts, explicit assumptions and defined review times. Communication should be timely, accurate and consistent; concealing a material disruption can increase legal and reputational harm.

Plans must be exercised. Tabletop exercises test decisions and communication; simulations test operational response; technical recovery tests test systems and data; full exercises test coordination across organisations. A plan that has not been tested is a hypothesis, not demonstrated capability.

7. Applied case: disruption at Northstar Medical Devices

This is a fictional illustrative case. Northstar manufactures infusion pumps for hospitals. Its final assembly plant is located in Country A. A specialised pressure sensor is supplied by two approved vendors, but both vendors obtain a ceramic substrate from the same sub-tier producer in Country B. The substrate producer operates near a river and relies on one export port. Northstar’s planning team considers the item dual-sourced and holds ten days of finished-goods inventory.

Problem

A severe flood closes the sub-tier plant and damages the export port. At the same time, a ransomware incident disables Northstar’s supplier portal and order-management interface. Hospital demand continues because a competing product is subject to recall. Northstar can assemble pumps for four days from on-hand sensors, but neither approved vendor can provide additional sensors immediately.

Analysis

The network map reveals that the two approved vendors are not independent. FMEA rates sensor unavailability as severity 10, occurrence 3 and detection 8, producing an RPN of 240. More importantly, the item is a critical single-point dependency despite apparent dual sourcing. Stress testing shows that the ten-day finished-goods inventory assumption is misleading: four days of sensor supply, not ten days of finished products, limits output. The cyber incident also prevents accurate visibility of open orders and shipment status.

The continuity analysis establishes that hospitals must receive a minimum allocation, safety and regulatory release cannot be bypassed, and substitution requires design validation. The MTPD for hospital supply is seven days, while normal supplier recovery is estimated at six weeks.

Approach and solution

Northstar activates its crisis team and establishes a verified manual order channel. It allocates available pumps according to clinical urgency and contractual commitments, rather than simply serving the largest customer. Engineering begins an accelerated validation of an alternative sensor already used in a related product. Procurement works with the vendors to identify a second ceramic-substrate source and secures limited air freight through an alternate airport. Quality and regulatory teams approve only documented, tested changes.

For longer-term resilience, Northstar:

• maps critical components to tier three;
• classifies common sub-tier dependencies;
• qualifies an independent sensor design;
• holds strategic component inventory rather than only finished goods;
• establishes a minimum manual operating capability;
• requires supplier cyber controls and tested recovery plans;
• creates flood and port-disruption triggers;
• conducts joint exercises with suppliers and logistics providers.

Outcome

Hospital allocation continues at a reduced level without an unsafe product substitution. Production returns to 90% of normal after three weeks and full capacity after seven weeks. The short-term response is costly, but it prevents a complete market withdrawal and exposes weaknesses that ordinary supplier scorecards had not shown.

Learning points

The case demonstrates that tier-one visibility can create an illusion of control; dual sourcing is ineffective when suppliers share a sub-tier; inventory must be placed at the actual constraint; cyber and physical risks can interact; and continuity decisions must balance commercial priorities with patient safety and fairness.

8. Governance, ethics and implementation challenges

Risk decisions distribute costs and protection among stakeholders. Allocating scarce products to the highest-margin customer may be commercially rational but ethically unacceptable when essential care is affected. Supplier audits should not shift unreasonable compliance costs to small suppliers without support. Data-sharing arrangements must respect confidentiality, privacy and competition law.

Regulatory obligations vary by sector and jurisdiction, but commonly concern product safety, cybersecurity, data protection, export controls, sanctions, environmental reporting, worker protection and due diligence. Organisations should maintain evidence of risk assessments, controls, tests and corrective actions. Compliance is a minimum requirement, not proof of resilience.

Common implementation failures include:

• treating the risk register as a static annual exercise;
• focusing only on tier-one suppliers;
• using unvalidated scores as objective probabilities;
• confusing insurance with continuity;
• assuming technology automatically creates visibility;
• designing plans without operational owners;
• ignoring correlated failures;
• failing to test manual workarounds;
• measuring only average cost and normal service.

Best practice combines executive sponsorship with operational ownership. Critical risks should have named owners, funded actions, measurable indicators and escalation thresholds. Procurement, operations, finance, IT, security, legal, quality, sustainability and communications should participate. The board should understand material concentrations and recovery capability, while frontline teams should know what to do at the moment of disruption.

Contemporary developments

Digital twins and graph-based analytics can represent multi-tier dependencies and test network changes. Internet-of-Things sensors improve condition and temperature monitoring. Predictive analytics can identify unusual lead-time, quality or financial signals. Generative AI may assist with document review, event summarisation and scenario generation, but it can hallucinate, reproduce biased data and expose confidential information. Human approval, secure data architecture, model monitoring and audit trails remain necessary.

Climate volatility, regionalisation, geopolitical competition and increased cyber dependence are making historical averages less reliable. Organisations are increasingly combining efficiency metrics with resilience dashboards, scenario portfolios and real-options thinking. The strategic direction is not a universal retreat from globalisation; it is a more deliberate design of dependencies, alternatives and response capability.

Chapter Summary

Supply chain risk is the possibility that uncertainty will prevent supply-chain objectives from being achieved. Effective management begins with context, multi-tier mapping and clear separation of hazards, exposure, vulnerability, events and consequences. Risk matrices support structured judgement, while FMEA analyses process failure modes; neither should be mistaken for precise probability models.

Resilience involves anticipation, absorption, recovery and adaptation. It is created through appropriate combinations of redundancy, flexibility, visibility, inventory, alternate capacity, supplier development, cyber controls, climate adaptation and collaborative governance. Stress testing is valuable because severe disruptions are often correlated and outside normal historical experience.

Continuity management translates resilience into priorities, roles, recovery targets, workarounds, communication and tested procedures. RTO, RPO and MTPD must be distinguished. Technology improves sensing and analysis but introduces additional dependencies and requires governance. Ethical allocation, legal compliance, human rights and environmental consequences must be included in risk decisions. The strategic objective is not zero risk; it is informed, proportionate and demonstrably recoverable exposure.

Key Terms

Supply chain risk: The effect of uncertainty on supply-chain objectives.

Hazard: A source of potential harm or disruption.

Exposure: The assets, processes or flows subject to a hazard.

Vulnerability: Susceptibility of an exposed element to harm.

Disruption: A realised interruption to expected supply-chain performance.

Resilience: Capability to prepare, absorb, recover and adapt.

Continuity management: Arrangements for maintaining or restoring critical activities.

Risk appetite: The level and type of risk an organisation is willing to accept.

Risk register: A structured record of risks, controls, owners and actions.

FMEA: A systematic analysis of potential failure modes, effects, causes and controls.

Risk Priority Number: The product of severity, occurrence and detection ratings in traditional FMEA.

Single point of failure: A dependency whose failure can interrupt a system without an effective alternative.

Stress testing: Examination of performance under severe but plausible scenarios.

Time to recover: Time required to restore a process or service to an acceptable state.

MTPD: Maximum tolerable period that a critical activity can be disrupted.

RTO: Target time for restoring a process or service.

RPO: Maximum acceptable age of recoverable data after an incident.

Redundancy: Additional resources or alternatives that reduce dependence on one element.

Postponement: Delaying final product configuration until demand or disruption information is clearer.

Residual risk: Risk remaining after controls and treatments are applied.

Review Questions

5 Short Answer Questions

1. Distinguish hazard, exposure, vulnerability and disruption.
2. Why can two approved suppliers fail to provide genuine dual sourcing?
3. What is the purpose of a risk register?
4. Distinguish RTO from RPO.
5. State two limitations of the traditional FMEA RPN.

5 Long Answer Questions

1. Explain how supply-chain mapping supports resilience strategy. Include tier-one and sub-tier dependencies.
2. Compare redundancy, flexibility, inventory and supplier development as risk treatments.
3. Explain how cyber, climate and geopolitical risks can interact with physical supply-chain flows.
4. Describe the elements of an effective supply chain continuity plan.
5. Critically evaluate the trade-off between lean efficiency and resilience.

3 Analytical / Application Questions

1. A firm has two suppliers for a critical component, but both depend on the same port and sub-tier raw-material producer. Construct a risk analysis and recommend a treatment portfolio.
2. Design a stress test for a regional distribution network facing a 30-day port closure, a 20% demand surge and temporary loss of the order-management system. Specify assumptions, metrics and decision triggers.
3. Using the Northstar case, propose a board-level resilience dashboard containing at least six indicators and explain how each would support governance.

Multiple Choice Questions with Answers

Question 1

Which statement best distinguishes resilience from continuity management?

A. Resilience concerns only financial insurance, whereas continuity concerns only inventory.

B. Resilience is the capability to prepare, absorb, recover and adapt; continuity converts that capability into plans and arrangements.

C. Resilience measures supplier price, whereas continuity measures customer satisfaction.

D. Resilience applies only to cyber risk, whereas continuity applies only to logistics risk.

Correct Answer: B. Resilience is the capability to prepare, absorb, recover and adapt; continuity converts that capability into plans and arrangements.

Question 2

In a qualitative risk matrix, what does the score R = L × I represent?

A. A statistically exact probability of loss

B. An ordinal prioritisation score based on likelihood and impact ratings

C. The recovery time objective

D. The financial value of inventory held

Correct Answer: B. An ordinal prioritisation score based on likelihood and impact ratings

Question 3

Traditional FMEA calculates the Risk Priority Number as:

A. S + O + D

B. S ÷ O × D

C. S × O × D

D. S − O − D

Correct Answer: C. S × O × D

Question 4

A high detection rating in traditional FMEA generally means that a failure is:

A. Easy to detect before causing an effect

B. Difficult to detect before causing an effect

C. Certain to occur

D. Low in severity

Correct Answer: B. Difficult to detect before causing an effect

Question 5

Expected loss is most appropriately calculated as:

A. The sum of scenario probabilities without consequences

B. The maximum consequence divided by the number of suppliers

C. The sum of each scenario probability multiplied by its consequence

D. The average inventory multiplied by lead time

Correct Answer: C. The sum of each scenario probability multiplied by its consequence

Question 6

If expected lead-time demand is 1,000 units, its standard deviation is 180 units and z = 1.645, what is the reorder point before rounding?

A. 1,029.6 units

B. 1,180.0 units

C. 1,296.1 units

D. 1,645.0 units

Correct Answer: C. 1,296.1 units

Question 7

Which condition most clearly defeats apparent dual sourcing?

A. The suppliers use different quality-inspection forms.

B. The suppliers are located in different buildings in the same plant.

C. The suppliers share a critical sub-tier producer and transport gateway.

D. The suppliers have different account managers.

Correct Answer: C. The suppliers share a critical sub-tier producer and transport gateway.

Question 8

What does RPO specify in continuity planning?

A. The target time to restore a service

B. The maximum acceptable age of recoverable data

C. The maximum number of approved suppliers

D. The required inventory turnover rate

Correct Answer: B. The maximum acceptable age of recoverable data

Question 9

Which is a preventive cyber barrier for a warehouse-management system?

A. Manual customer allocation after an outage

B. Post-incident public communication

C. Network segmentation and multifactor authentication

D. Expedited transport after stockout

Correct Answer: C. Network segmentation and multifactor authentication

Question 10

Why should a resilience dashboard include more than recovery time?

A. Recovery time is unrelated to disruption performance.

B. A single recovery-time measure can hide the severity of service loss during the disruption.

C. Recovery time can only be measured for suppliers.

D. Recovery time is always identical to RPO.

Correct Answer: B. A single recovery-time measure can hide the severity of service loss during the disruption.