Analyze your supply chain risks

- Have you ever noticed that when you're in charge of managing an operation, it can feel like you're always putting out fires? That makes it hard to devote time and energy to other important responsibilities like process improvement, information security, and employee morale. In order to get out of that reactive firefighting mode, you need to be prepared for surprises, and one of the best ways to prepare is by using a risk register. In this video, we'll use the word PREPARE to build a risk register using a simple but powerful seven-step process. Building a risk register starts by considering what risks are possible. This is when you need to get creative and think outside of the box. Get your team together and brainstorm about anything that could have an impact on your work. Depending on where you're located, hurricanes, earthquakes, and forest fires are all examples of possible risks. Next, for each of those possibilities, consider the results. How would your operations be affected if one of those risks came true? Each risk might have several results. For example, if you were hit by a hurricane, you might lose electrical power, some of your staff might be unable to come to work, and your inbound shipments could be delayed. These are all different results from the same possible risk. Now, for each of those results, estimate the impact. I suggest that you come up with a scale from one to 10, with one being a minor impact and 10 being the most severe. You're just estimating, so don't worry about being too precise; just be consistent. The next step is to go back and determine the probability of each possible risk. How likely is it that each of your risks might occur? Again, create a scale from one to 10, with one meaning it is unlikely but still possible and 10 meaning you know it's going to happen, you just aren't sure when. With this data, you can begin to analyze your risk profile. Your risk register can automatically calculate a risk index by multiplying the probabilities by the impacts. You can use these risk indexes to determine which risks you need to focus on first. The next step is to determine how you will respond to each risk. The truth is, you only really have four options. You can accept the risk and do nothing, or you might be able to avoid the risk by making changes to your supply chain. You might also be able to transfer the risk to someone else, either by buying insurance or by assigning it to them in a contract, or you can mitigate the risk. In other words, you can do things to make the risk less likely to occur, or to make the results less severe. Now your risk register is complete, but you're not quite done, because the last step to prepare for supply chain risks is to educate your team about the risk register and your risk management plans. Everyone needs to know what they're supposed to do when a risk emerges. Using the PREPARE system is an easy way to create a risk register that will help you be more proactive as an operations manager, and that will make you more successful as a leader.