What is supply chain risk management?

Supply chain risk management identifies where a company's suppliers, logistics, or sourcing decisions could disrupt operations or expose it to compliance and reputational risk — and puts controls in place to reduce that exposure before disruption happens, not just react to it afterward.

Common types of supply chain risk

  • Operational risk — supplier failure, capacity constraints, or logistics disruption
  • Regulatory and compliance risk — sourcing from regions or suppliers that create exposure to regulations like EUDR
  • Environmental risk — climate-related disruption (extreme weather, resource scarcity) affecting suppliers
  • Reputational risk — labor practices or environmental performance issues further up the supply chain

How companies manage supply chain risk

  1. Mapping the supply chain — identifying critical suppliers, including beyond direct (tier-1) relationships
  2. Supplier evaluation — assessing supplier performance and risk before and during the relationship
  3. Diversification — reducing dependency on single suppliers or regions
  4. Monitoring — tracking supplier performance and emerging risks on an ongoing basis, rather than only at onboarding

Why it matters

For most companies, supply chain risk is now understood to exceed the risk sitting within their own operations — which is also why Scope 3 emissions (upstream and downstream value chain emissions) are typically the largest share of a company's total carbon footprint.

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