Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Supply Chain Risks — Definition, Types, Classifications + Template
As taught in the Supply Chain Basics for Procurement Professionals Course / ★★★★★ 4.9 rating
- Supply chain risks are events or conditions that can disrupt operations, increase costs, or reduce reliability across the entire supply chain.
- Risks can originate from human resources, products, infrastructure, information systems, or financial factors.
- Understanding risk types and their impact helps organizations assess, prioritize, and mitigate disruptions effectively.
What are Supply Chain Risks?
Supply chains operate in a dynamic environment where risks can arise from many different sources. A small issue affecting one participant can quickly escalate and disrupt the entire supply chain. Because supply chains are interconnected, risks affecting one organization often become risks for all others involved.
Understanding supply chain risks is essential for protecting efficiency, reliability, and profitability. By identifying and analyzing risk types, organizations can take proactive steps to reduce disruptions and improve resilience.
5 Main Types of Supply Chain Risks
The causes of supply chain risk can be grouped into five main categories:
1. Human Resources Risks
Human resources risks relate to people and labor conditions within the supply chain. These include the availability of skilled personnel, employee behavior, workplace health and safety, environmental responsibility, and outsourcing.
Shortages of qualified staff or poor labor conditions can disrupt operations. Outsourcing can also introduce uncertainty related to quality, reliability, and compliance.
2. Product-Related Risks
Product risks are linked to the goods being produced and sold. These risks arise from changing consumer preferences, competitive pressure, marketing and promotional activities, malicious product attacks, commercialization challenges, and inventory management issues.
Unexpected shifts in demand or market trends can destabilize supply chains and lead to excess stock or shortages.
3. Infrastructure Risks
Infrastructure risks involve physical assets and facilities. These include equipment failures, inefficient facility layouts, building issues, and legal liabilities.
Poorly maintained infrastructure can cause delays, increase costs, and reduce operational reliability.
4. Information Risks
Information risks result from problems related to data and information systems. These include a lack of data, loss of access to critical information, unauthorized access, weak information networks, and cybersecurity threats.
Poor data quality or security breaches can severely impact decision-making and supply chain coordination.
5. Financial Risks
Financial risks relate to money flows and economic conditions. These include currency instability, fluctuating commodity prices, budgeting issues, weak financial controls, and theft.
Economic volatility and financial mismanagement can lead to cost overruns and supply disruptions.
3 Common Ways to Classify Supply Chain Risks
Supply chain risks can be classified in several ways:
1. Internal and External Risks
Internal risks originate within the organization and can be managed through internal controls and policies. Examples include employee errors, equipment failures, inefficient inventory management, and poor financial planning.
External risks come from outside the organization and are harder to control. These include supplier disruptions, raw material price volatility, natural disasters, and regulatory changes.
2. General and Specific Risks
General risks affect entire industries or supply chains. Examples include economic recessions, trade policy changes, or global shortages.
Specific risks affect individual companies, suppliers, or processes. Examples include fires at production facilities, cyberattacks on a single firm, or quality issues with one supplier.
3. Constant and Variable Risks
Constant risks are ongoing and relatively predictable, such as routine maintenance costs or typical transportation delays.
Variable risks change over time and are less predictable. These include geopolitical events, pandemics, sudden demand spikes, or emerging technology failures.
Supply Chain Risk Assessment Template
Risk is commonly assessed by evaluating two factors:
- The likelihood that a risk event will occur
- The impact or severity of the consequences if it occurs
High-likelihood risks with severe impacts represent the greatest threat and should be prioritized. Low-likelihood risks with limited impact are generally less critical.
This approach helps organizations focus their resources on the risks that matter most and develop effective mitigation strategies.
To support structured risk assessment, use the template below to define and evaluate risks across your supply chain.
Conclusion
Supply chain risks can arise from many sources and often affect multiple participants at once. Understanding risk types, how risks are classified, and how they are assessed allows organizations to prioritize threats and take proactive action.
By combining risk identification, probability, and impact assessment and structured mitigation planning, companies can reduce disruptions and maintain stable supply chain operations in uncertain environments.
Frequently asked questions
What are supply chain risks?
Supply chain risks are events or conditions that can disrupt operations, increase costs, or reduce reliability across the supply chain.
What are the main types of supply chain risks?
The main types include human resources, product-related, infrastructure, information, and financial risks.
How is supply chain risk assessed?
Risk is assessed by evaluating the likelihood of an event occurring and the impact it would have on the supply chain.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
