Council of Supply Chain Management Professionals (CSCMP) Practice Exam

In risk management, prioritization is fundamentally guided by assessing both the likelihood of a risk occurring and the severity of its potential consequences. This methodical approach ensures that resources and attention are directed towards the most critical risks that could significantly impact operations.

By evaluating risks based on both how likely they are to happen and the severity of the outcomes if they do occur, organizations can develop a focused risk management strategy. For example, a risk that is highly likely to happen and could cause severe damage will be prioritized over a risk that is unlikely to materialize, even if its potential impact is significant.

This comprehensive evaluation aligns risk management efforts with organizational goals, enabling teams to allocate resources effectively and create mitigation plans for the most pressing risks. Prioritizing risk in this manner leads to more strategic decision-making and better preparedness against potential disruptions.