Certified Supply Chain Professional (CSCP) Practice Exam

Which risk response involves eliminating a risk or protecting against its impact?

1. Accept

2. Avoid

3. Transfer

4. Mitigate

The correct answer is: Avoid

The response that involves eliminating a risk or protecting against its impact is avoidance. In supply chain management and risk management in general, avoidance occurs when an organization identifies a potential risk and takes steps to eliminate it entirely or to prevent it from occurring in the first place. This can be done through various strategies such as redesigning processes, changing suppliers, or implementing new technologies that reduce the likelihood of a risk event. For instance, if a company identifies a risk associated with relying on a single supplier, it might choose to diversify its supplier base to avoid the risk of supply chain disruptions. This approach is particularly relevant in contexts where certain risks can be fully prevented rather than managed. Mitigation, on the other hand, involves taking steps to reduce the impact or likelihood of a risk rather than eliminating it completely. Transfer refers to shifting the risk to another party, such as through insurance or outsourcing operations. Acceptance involves recognizing the risk but choosing not to take action to prevent it, typically because the cost of mitigation or avoidance may outweigh the potential impact.