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.

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Posted by Carlos Alvarenga

Carlos Alvarenga is the Executive Director of World 50 ThinkLabs and an Adjunct Professor at the University of Maryland's Smith School of Business.

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