Article Risk Management Updated December 27, 2025 10 min read By Patrick Gagné

How to Manage Risk and Uncertainty in the Supply Chain

Patrick GagnéHead of Supply Chain Services, GPSI

Supply chain risk management allows businesses to identify, evaluate, and reduce risks — streamlining operations, reducing costs, improving customer service, and boosting the bottom line.

Managing risk and uncertainty in the supply chain

85% of businesses face
disruptions yearly

The purpose of risk management is to reduce vulnerability and ensure profitability, allowing a company to gain a competitive advantage. Yet most supply chain businesses fail to identify and manage risks — often because they lack evidence-based knowledge, cutting-edge tools, and optimal resources. This guide answers the question: how do you manage risk and uncertainty in the supply chain?

DEFINITION

Supply chain risk refers to unwanted functions, malicious activities, and uncertainties that can disrupt a product’s design, manufacturing, production, and distribution — and that also affect the installation, operation, and maintenance of a supply chain system or network. (Source: Law Insider)

Key Takeaways

Primary 2023 risks: poor supplier performance, labour shortages, demand complexity, inflation, recession likelihood, geopolitics, and environmental concerns.
Companies must prioritize risk management over reactive actions — to reduce costs, mitigate damage, and optimize customer service.
An evidence-based strategy protects production, finances, reputation, compliance, and customer trust.

At a GlanceStrategies to navigate supply chain risk

Strategy	Key insights	Value to businesses
Risk identification	Analyze potential disruptions across the supply chain.	Enables proactive mitigation and strategic planning.
Supply chain diversification	Use multiple suppliers and logistics options to reduce dependencies.	Increases flexibility and reduces vulnerability.
Technology integration	Leverage data analytics and AI for predictive insights.	Enhances decision-making and response capabilities.
Contingency planning	Develop response plans for various risk scenarios.	Ensures business continuity and minimizes disruptions.
Strong partnerships	Foster collaboration with suppliers and stakeholders.	Improves resilience and adaptability.

The BasicsUnderstanding supply chain risk & uncertainty

Moody’s Analytics highlights ten common examples of supply chain risk:

Disruptions in production and operations
Cybersecurity incidents
Quality issues and defects
Transportation and logistics disruptions
Geopolitical risks and trade disputes
Supplier and third-party risks
Environmental risks and sustainability concerns
Demand volatility and shifts
Labour shortages and skills gaps
Regulatory and compliance risks

85%

of businesses face one or more disruptions yearly (Supply Chain Digital)

75%

experienced ransomware or a cyberattack during COVID-19

40%

failed to recover data lost to a cyberattack

An evidence-based risk management strategy — with reliable standards, protocols, and tools — delivers optimal production and delivery, earlier detection of financial risks, faster response to unexpected events, brand and reputation protection, stronger client attraction and retention, improved customer satisfaction, and ongoing compliance.

Step OneAssessing supply chain risk

Per Sedex, reducing risk requires a multi-pronged approach focused on historical and real-time data — a systematic plan targeting potential hurdles and growth opportunities.

Map your supply chain

Get a transparent, bigger-picture view of supplier locations — the tier of suppliers and the regions they operate in, including outsourced contacts, labour providers, and other high-risk parties.

Recognize high-level risk factors

Analyze country and regional factors — weak legal systems, discrimination, corruption, poverty, security issues, migration corridors — using real-time data from sources like UN agencies and research firms.

Prioritize risks by impact

With limited resources, rank risks by seriousness and likelihood (per UNGPs). Ask how likely and severe a risk is, how many it affects, and what could reverse the impact.

The ToolkitStrategies for managing risk and uncertainty

Contingency planning

Develop protocols to prepare for unexpected events — built on SMART and ECG principles and an evidence-based framework. Example: switch to alternative providers and prioritize shipments during a transport strike.

Supplier relationship management

Align goals, then collaborate to improve quality, reduce costs, boost efficiency, and grow revenue — spanning supplier selection, performance monitoring, contract management, and development (per Tech Target).

Scenario planning

Create hypothetical scenarios from possible outcomes and analyze each one’s impact (per Gartner). Identify drivers of change — disasters, regulations, geopolitics — using historical and real-time data (per MIT).

Data analytics & predictive modelling

Track inventory, demand, bottlenecks, supplier performance, and lead times. Replace siloed systems and manual spreadsheets with ML, cloud computing, predictive analytics, and big data for real-time visibility.

Building ResilienceResilience & business continuity planning

Per SAP, supply chain resilience lets companies respond efficiently to operational disruptions — built on flexible contingency planning and forecasting across sourcing, logistics, and delivery.

Manufacturing network diversification

Diversify sourcing bases — e.g., establish partnerships with suppliers outside the U.S. and China to avoid disruptions and optimize sourcing and delivery.

Nearshoring

Reduce geographic dependence on global networks to shorten cycle times and gain inventory control — though local and regional chains add players, complexity, and potential cost. Reliable when used carefully.

Ecosystem partnerships

Build solid relationships with contract manufacturers to diversify production and distribution across countries — a key lesson from the COVID-19 pandemic for preventing future disruptions.

Business continuity planning

Identify alternative suppliers and transport, set safety-stock levels, and streamline stakeholder communication (per EY) — with ongoing monitoring of contingency plans to stay resilient (per American Express).

Speed & FlexibilityThe role of an agile supply chain

An agile supply chain improves process efficiency and empowers employees to lift productivity and the bottom line. Per FourKites, agility is an excellent way to respond to sudden changes in supply and demand — acting quickly and decisively.

It’s important to distinguish agile from lean: an agile chain prioritizes flexibility to handle sudden demand shifts or crises, while a lean chain pursues continuous improvement to maximize savings and minimize redundancies. The COVID-19 pandemic exposed how static many supply chains were — yet companies like Amazon thrived through rapid response and reliable delivery.

Final WordsAct proactively

The supply chain is the core of your company, and any disruption can harm day-to-day operations — a small data error or delivery delay can cause financial distress. Sometimes reputational damage is irreparable, which is why you must act proactively and develop a sophisticated supply chain risk management strategy to stay afloat.

Prioritize risk management over reactive action. An evidence-based, technology-driven strategy reduces vulnerability, builds resilience, and turns uncertainty into competitive advantage. — Patrick Gagné, Head of Supply Chain Services

Frequently asked questions

What is supply chain risk?

Supply chain risk refers to unwanted functions, malicious activities, and uncertainties that can disrupt a product’s design, manufacturing, production, and distribution — and that also affect the installation, operation, and maintenance of a supply chain system or network.

What are common supply chain risks?

Common risks include disruptions in production and operations, cybersecurity incidents, quality issues and defects, transportation and logistics disruptions, geopolitical risks and trade disputes, supplier and third-party risks, environmental and sustainability concerns, demand volatility, labour shortages and skills gaps, and regulatory and compliance risks.

How do you assess supply chain risk?

Map your supply chain to understand supplier tiers and regions, recognize high-level country and regional risk factors, and prioritize risks by their likelihood and potential impact so limited resources focus on the risks that could cause the most severe damage.

What strategies help manage supply chain risk and uncertainty?

Key strategies include contingency planning, supplier relationship management, scenario planning, and data analytics and predictive modelling — supported by resilience tactics such as manufacturing network diversification, nearshoring, ecosystem partnerships, and business continuity planning.

Why is supply chain risk management important?

Around 85% of businesses experience one or more supply chain disruptions each year. Proactive, evidence-based risk management reduces costs, prevents financial instability by detecting risks earlier, protects brand and reputation, improves customer satisfaction, and maintains regulatory compliance.

Patrick Gagné

Head of Supply Chain Services, GPSI

Patrick is passionate about manufacturing and operational efficiency. He brings creative ideas to the table, seeking to improve business processes, and enjoys forward thinking and innovation initiatives. Patrick has navigated through most business functions, learning how to address pain points and recommend paths for problem resolution and a sustainable way forward.

De-risk your supply chain

GPSI helps you identify, assess, and mitigate supply chain risk — with supplier risk assessment, contingency planning, and the real-time visibility to stay resilient. Let’s find a time to connect.

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