The Procurement Glossary » Supplier Risk
Supplier Risk
Suppliers & Vendors
Definition
The exposure a buyer faces from a supplier's potential failure — financial, operational, compliance or reputational.
Explanation
Supplier risk management identifies, assesses and mitigates these threats through due diligence, monitoring and contingency planning. It is heightened for strategic and sole-source suppliers, where failure would be most damaging.
Example
A financial-health alert on a key supplier prompts the buyer to qualify a backup before problems hit.
Related terms
- Supply Risk — The risk that supply of a good or service is disrupted, constrained or made more costly.
- Due Diligence — The investigation of a supplier's legitimacy, capability, financial health and compliance before engaging it.
- Business Continuity Planning (BCP) — Planning to keep critical operations running, or recover them quickly, when disruption strikes.
- Financial Stability Assessment — An evaluation of a supplier's financial health to gauge the risk that it fails or cannot meet commitments.
Related concepts
- Supplier Management — Onboarding, qualifying, evaluating and governing the suppliers a business relies on — turning a scattered vendor list into a managed supply base.
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Frequently Asked Questions
What is Supplier Risk?
The exposure a buyer faces from a supplier's potential failure — financial, operational, compliance or reputational. Supplier risk management identifies, assesses and mitigates these threats through due diligence, monitoring and contingency planning. It is heightened for strategic and sole-source suppliers, where failure would be most damaging.
Can you give an example of Supplier Risk?
A financial-health alert on a key supplier prompts the buyer to qualify a backup before problems hit.
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