At a gathering of SC executives yesterday I mentioned the Velocity of Risk concept and use the current BPI case as an example of why understanding this concept is important. Here we have a company making a perfectly legal product that in the space of a few weeks finds itself questioning it’s very survival, all because of a blog posting by a chef. In other words, BPI, the product’s maker, went from “normal” risk range to the equivalent of a VaR breakpoint in days. This is why I urge clients to move beyond the traditional probability x impact digrams so common in SCRM and to add the third dimension of speed. Understanding now just impact or probability but also how quickly one moves through risk accumulation is a critical concept for SCRM managers to understand and adopt.
Posted by Carlos Alvarenga
Carlos A. Alvarenga is the Executive Director of World 50 Labs and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.