Reference no: EM131035751

Risk mitigation is important as companies expand their supply chain into emerging, lower cost markets. Global companies are increasing their focus on risk management. Any contract won, new order received or new business opportunity includes an element of risk. Can the business deliver the product or service in accordance with specifications, commitments and delivery dates? Liquidated damages are often an article in the contract subjecting the supplier to potential payments back to the purchaser. This is risk. Any commitment to deliver results in risk. Risk is tangible. Risk managers might be assigned to assist the Project Managers to identify risks then help monitor each throughout project execution. The key is risk mitigation. Examples include: Shop Loading- Companies strive to keep their factories working steady avoiding spikes in orders by nominating work to those shops less busy. Low Cost Sourcing- Opportunities for lower pricing might outweigh the risk of currency volatility. Customer preferred sources- How can you argue this one if they dictate where to procure from. Currency Fluctuations- At time of contract, a supplier and purchaser agree to a price, often in a currency not recognized by one party. Will an unexpected fluctuation in currencies adversely affect either party? Hedging is a method of risk mitigation. Any others?