Hypothetical example of each of the six types of risk to a global supply chain
give a hypothetical example of each of the six types of risk to a global supply chain, as described in this chapter. While this is being asked to be hypothetical, it can be a real example. Given what is happening in the world today, you may pull a real example from the news headlines and talk about these six risks. The choice is yours to make.
Sample Solution
Global Supply Chain Risks: Hypothetical Examples
Based on the six types of risk discussed in the chapter, here are some hypothetical examples to illustrate their impact on a global supply chain:
1. Financial Risk:
- Scenario: A major bank experiences a financial crisis, leading to a credit freeze for a company heavily reliant on that bank for trade finance. This disrupts the company's ability to pay for raw materials or finished goods from overseas suppliers, causing delays and production stoppages.
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Geopolitical Risk:- Scenario: Rising tensions between two countries with a significant trade relationship lead to sanctions and trade restrictions. A company that sources key components from one of these countries can no longer import them, forcing them to find alternative suppliers, potentially at higher costs and with production delays.
- Environmental Risk:
- Scenario: A severe hurricane devastates a coastal region where a major manufacturing hub for a specific product is located. Factories are destroyed, transportation infrastructure is crippled, and power outages disrupt production. This creates a shortage of the product globally, impacting businesses and consumers who rely on it.
- Supply Risk:
- Scenario: A cyberattack targets a critical supplier of a vital raw material used in various manufacturing processes. The attack disrupts production at the supplier's facilities, leading to a shortage of the material and impacting companies all along the supply chain that depend on it.
- Demand Risk:
- Scenario: A sudden economic downturn leads to a sharp decline in consumer spending on a particular product category. Companies that manufacture or sell these products experience a significant drop in demand, forcing them to reduce production, lay off employees, and potentially face financial difficulties.
- Connectivity Risk:
- Scenario: A major shipping canal experiences a blockage due to a large grounded vessel. This disrupts global shipping routes, leading to delays and significant backlogs of cargo ships waiting to pass through the canal. Companies relying on these routes face delays in receiving raw materials and finished goods, impacting production schedules and potentially leading to product shortages.