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Derek is a Supply Chain Manager conducting a risk assessment. A supplier from 10,000 miles away could fail to deliver, and the risk is classified as major. Using a 1--5 scale for severity and likelihood, which score applies?
The correct score is 25, which is the highest possible risk score on a 1--5 scale. This reflects a major risk with both severity [5] and likelihood [5] rated as high. The risk assessment methodology multiplies these two factors [5 5 = 25] to produce a risk rating.
This scoring system enables supply chain managers to rank risks and prioritise mitigation strategies. A risk scored at 25 requires urgent attention, such as developing contingency plans, dual sourcing, increasing safety stock, or renegotiating terms with suppliers.
Lower scores such as 1, 5, or 10 indicate lower overall risk exposure, but in this case, the combination of long geographical distance, reliance on a low-cost country supplier, and criticality of the order elevates the risk to the maximum score.
Risk assessment tools like this are central to category management because they support proactive risk mitigation rather than reactive crisis management.
[Ref: CIPS L5M6 Study Guide, p.56 -- Risk assessment scoring and protocols]