Certified Supply Chain Professional (CSCP) Practice Exam

Which of the following terms best describes the ability to lessen both the likelihood and impact of risks?

1. Mitigation

2. Acceptance

3. Avoidance

4. Transference

The correct answer is: Mitigation

The term that best describes the ability to lessen both the likelihood and impact of risks is mitigation. Mitigation involves implementing strategies and actions designed to reduce the potential impact of risks as well as limit the probability of those risks occurring. This can include measures such as improving safety protocols, quality assurance processes, and enhancing supply chain practices to minimize disruptions. Mitigation is particularly crucial in supply chain management, where organizations aim to maintain operational continuity and minimize losses due to unforeseen events. By focusing on risk mitigation, companies can create more resilient systems that can withstand and adapt to challenges. On the other hand, acceptance refers to recognizing a risk and deciding to live with it without taking any measures to control it, which does not actively reduce either likelihood or impact. Avoidance means eliminating the risk by changing plans or activities to ensure the risk is never encountered, which might not be feasible in all scenarios. Transference involves shifting the risk to another party, such as outsourcing or purchasing insurance, but this does not inherently lessen the risk's impact on the original organization; it merely transfers the responsibility. Therefore, mitigation stands out as the most effective approach to proactively address risks within a supply chain.