Certified Supply Chain Professional (CSCP) Practice Exam

What best describes the process of prioritizing risks?

1. Assigning a dollar value to each risk

2. Evaluating risks based on their nature and impact

3. Sorting risks by the assigned team member

4. Selecting the minimum risk to address first

The correct answer is: Evaluating risks based on their nature and impact

Prioritizing risks is fundamentally about evaluating and understanding each risk in terms of its potential impact and likelihood of occurrence. This process allows organizations to focus their resources on the most critical risks that could adversely affect their objectives. By assessing risks based on their nature and potential impact, decision-makers can develop a clearer picture of which risks require immediate attention and which can be monitored over time. This approach is essential for effective risk management, enabling organizations to proactively manage and mitigate risks in a structured manner. The other options do not encompass the broader perspective needed for prioritization. Assigning a dollar value can be part of quantitative risk assessment, but it does not provide a comprehensive view of a risk’s significance. Sorting risks by assigned team members or selecting the minimum risk to address first fails to engage with the urgency and importance of risks relative to one another, which is critical in a prioritization process.