Certified Supply Chain Professional (CSCP) Practice Exam

In the context of risk management, what is a 'known risk'?

1. A risk that has been identified and analyzed

2. A risk that is extremely likely to happen

3. A risk that has a low impact

4. A risk that has no relevant history

The correct answer is: A risk that has been identified and analyzed

A 'known risk' refers to a risk that has been identified, assessed, and analyzed, allowing organizations to plan for its potential impact. This characterization allows organizations to develop strategies to manage or mitigate the risk effectively. When risks are known, they can be integrated into risk management frameworks, enabling informed decision-making and proactive measures. The identification and assessment processes typically involve evaluating the potential consequences of the risk and the likelihood of its occurrence. This understanding helps teams prioritize resources toward the most impactful risks. Managing known risks becomes critical in creating contingency plans and implementing risk response strategies. The other concepts, while they relate to risk management, do not fully capture the essence of what constitutes a known risk. For example, merely being likely to happen does not qualify a risk as known if it hasn't been identified or analyzed. Similarly, a low-impact risk can still be unknown or ignored in strategic planning, hence not qualifying as a known risk. Lastly, a lack of historical data does not conclusively define a known risk; it might instead indicate an unknown risk that needs further exploration. Thus, the focus on identification and analysis is central to understanding the term 'known risk.'