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CMI Level 5 Managing Supply Chain Risk (L5M2)

Managing supply chain risk is a crucial aspect of procurement and logistics, ensuring stability and resilience in global supply networks. The CIPS Level 5 Managing Supply Chain Risk (L5M2) unit provides learners with an in-depth understanding of different risk types, their impact on supply chains, and strategies for effective risk mitigation. This unit explores internal and external risk factors, contractual risk management, ESG (Environmental, Social, and Governance) considerations, and contingency planning. By mastering these principles, professionals can enhance operational resilience, safeguard supply chains from disruptions, and drive strategic risk management initiatives.

Unit Objectives

The key objectives of CIPS Level 5 Managing Supply Chain Risk (L5M2) include:

• Equipping learners with the ability to identify and analyze risks affecting supply chains.
• Understanding the role of contractual terms, insurance, and third-party risk management in mitigating supply chain risks.
• Assessing the impact of ESG (Environmental, Social, and Governance) risks on supply chains.
• Developing strategic risk mitigation plans to enhance supply chain resilience.

Learning Outcomes

The significant learning outcomes of the unit CIPS Level 5 Managing Supply Chain Risk (L5M2) are demonstrated below:

LO1: Understand the nature of risk affecting supply chains

This learning outcome focuses on identifying and analysing various risks that impact supply chains, including financial, strategic, operational, and hazard risks. Learners will develop an understanding of risk assessment tools, risk exposure, and the concept of risk appetite. The outcome also explores Environmental, Social, and Governance (ESG) risks affecting supply chains and the positive or negative consequences of risk. Additionally, learners will assess operational risks such as contract failures, financial instability, quality issues, security threats, and outsourcing challenges. This outcome ensures that learners can identify, assess, and mitigate risks effectively, contributing to a more resilient supply chain.

LO2: Understand processes in managing risk in supply chains

This learning outcome provides insights into the practical approaches for risk management in supply chains. Learners will explore contractual terms, indemnity clauses, liability clauses, and force majeure provisions to mitigate risks. Additionally, they will assess the role of third-party providers in risk management, including credit rating agencies, auditors, and disaster recovery services. The use of insurance in supply chain risk management is also covered, including trade credit insurance, professional indemnity, and product liability insurance. Furthermore, learners will examine the importance of business continuity planning and contingency measures to prepare for supply chain disruptions. This outcome ensures learners can implement proactive risk management strategies to enhance supply chain stability.

LO3: Understand risk mitigation strategies in supply chains

This learning outcome focuses on risk assessment methodologies to evaluate probability, impact, and vulnerability in supply chains. Learners will explore the use of probability theory, statistical data analysis, and risk registers to systematically assess and document supply chain risks. They will also learn about the development of risk management culture and strategies, emphasising organisational preparedness, stakeholder engagement, and transparent risk reporting. By mastering this learning outcome, learners will gain the ability to develop and implement risk mitigation plans, ensuring efficient risk monitoring and continuous improvement within supply chain operations.

Assessment Criteria

The assessment of CIPS Level 5 Managing Supply Chain Risk (L5M2) aligns with the above learning outcomes. Learners will be evaluated based on:

1.0 Understand the nature of risk affecting supply chains

1.1 Analyse the different types of risk that can impact on supply chains

• Definition of risks, hazards, exposure, and risk appetite.
  
• Categories of risk: financial, strategic, operational, and hazard.
  
• ESG (Environmental, Social, and Governance) risks impacting supply chains.
  
• Tools for assessing internal and external sources of risk.
  
• Positive and negative consequences of risk.
  
• Direct and indirect losses.
  

1.2 Assess operational risks in supply chains

• Contract failure.
  
• Financial risks: currency, cash flow, and insolvency.
  
• Quality failure.
  
• Security of supply.
  
• Technology risks.
  
• Logistics complexity.
  
• Risks in outsourcing and offshoring.
  
• ESG (Environmental, Social, and Governance) risks impacting supply chains.
  

1.3 Compare methods for eliminating fraud and corruption in supply chains

• Types of corruption.
  
• Types of fraud.
  
• Governance of fraud and corruption in supply chains.
  
• The use of ethical codes including the CIPS Code of Conduct to support the elimination of risk.
  

1.4 Assess the risks in supply chains that can impact organisational ESG considerations

• Defining ESG (Environmental, Social, and Governance) considerations in the context of sustainable procurement and supply.
  
• How environmental supply chain risks impact organisational ESG considerations.
  
• How social supply chain risks impact organisational ESG considerations.
  
• How governance supply chain risks impact organisational ESG considerations.
  
• Standards for sustainable procurement: ISO standards, United Nations (UN), International Labour Organization (ILO), and local sustainability standards.
  

2.0 Understand processes in managing risk in supply chains

2.1 Examine the use of contractual terms to help manage risk in supply chains

• Purpose and use of model form contracts in managing supply chain risk.
  
• Purpose and development of indemnity and liability clauses in supply chain risk management.
  
• Purpose and use of clauses for testing, inspection, and acceptance.
  
• Impact of force majeure clauses in managing supply chain risk.
  
• Global sourcing considerations and compliance with standards.
  

2.2 Analyse the use of third parties in risk management in supply chains

• Use of third-party providers for credit rating, debt factoring, and related business services in managing supply chain risk.
  
• Use of third-party providers for auditing risks including ESG risks in supply chains.
  
• Use of third-party providers for disaster recovery services.
  

2.3 Assess the use of insurances for supply chain risks

• Use of insurance in managing supply chain risk.
  
• Legal principles of insurance.
  
• Categories of insurance: employers and public liability, professional indemnity, product liability, and trade credit.
  
• Insurance claims, underwriting, and supply chain risk management.
  

2.4 Examine the use of contingency plans in response to risks in supply chains

• Components of a business continuity plan and disaster recovery plan.
  
• Definitions and purpose of disaster recovery and business continuity planning.
  
• Importance of reviewing and testing contingency plans.
  

3.0 Understand risk mitigation strategies in supply chains

3.1 Evaluate the use of probability and impact assessments to manage risks in supply chains

• Methodologies for assessing the probability and impact of risk.
  
• Vulnerability assessments.
  
• Collating statistical evidence of risks.
  
• Use of probability theory and statistical distribution methods to determine the likelihood of risk.
  

3.2 Analyse and propose how risk assessments and risk registers can mitigate risks in a supply chain

• Creation and use of templates for risk assessments and risk registers.
  
• Engaging stakeholders in the development and review of risk assessments and registers.
  
• Importance of reporting and action plans in risk management.
  

3.3 Explain the development of a risk management culture and strategy to improve supply chains

• Developing a strategic approach to risk management.
  
• Role of organisational culture in the management of supply chain risk.
  
• Risk management process and the development of risk management plans.
  
• Resource requirements for effective supply chain risk management.
  
• Supply chain risk visibility and reporting to stakeholders.
  

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