Supply chain risk management (SCRM) has taken the forefront recently, given the magnitude of cybersecurity and other risks associated with disruptions in organizations’ supply chain operations. Find out more about the process in this article.

Understanding Supply Chain Risk Management and Its Importance

SCRM is the process of identifying, assessing, and mitigating risks that could impact an organization’s supply chain. The goal is clear: protect operations, reputation, and the bottom line.

SCRM has become essential as globalization makes supply chains more complex and interconnected. Today, organizations depend on vast networks of suppliers, manufacturers, distributors, and logistics partners to deliver goods and services. But with that complexity comes more potential points of failure, especially related to cybersecurity.

Disruptions—ransomware attacks, programming flaws, halted operations—can trigger cascading effects, from financial loss to reputational damage. A recent example? In March 2025, the Silk Typhoon threat group escalated its campaign against IT supply chains, targeting multiple managed service providers and remote access platforms. Their activity enabled access to downstream organizations, including healthcare and government institutions—demonstrating how one weak point in the supply chain can endanger many.

This highlights a growing blind spot: even if an organization secures its own systems, it may still be vulnerable through third parties. Gartner (News - Alert) predicts that by 2025, 45% of organizations worldwide will face attacks on their software supply chains—a threefold increase from 2021.

SCRM offers a proactive defense. It builds resilience, helps navigate uncertainty, and ensures business continuity. By reducing disruption, improving vendor accountability, and strengthening compliance, it safeguards not just systems—but trust, brand value, and long-term sustainability.

What Types of Risks Impact Supply Chain Operations?

Two major types of risks are identified and mitigated in a supply chain risk analysis—internal and external.

Internal Risks

Internal supply chain risks come from within an organization. A good example would be the IT system failure that caused the Sony PlayStation 23-day-long network outage. It is worth noting that this outage resulted from a cyber attack that led to the theft of data belonging to more than 77 million users.

• Operational: These risks have to do with a company’s day-to-day operations. Machinery breakdowns, IT system failures (like the example above), and labor disputes are some examples.

• Financial: These risks can stem from exchange rate fluctuations, liquidity problems, or capital access issues. They can hinder an organization from procuring raw materials or paying suppliers on time.

• Strategic: These risks are often caused by mergers, acquisitions, and entry into new markets.

• Human resource: Like any business transition, employee turnovers, strikes, or lack of training can affect companies’ supply chain performance.

• Quality: Organizations that had to compromise the quality of their products or raw materials may suffer from recalls, reputational damage, and financial losses.

External Risks

External supply chain risks originate from outside an organization. A notable example would be the 2021 Colonial Pipeline ransomware attack that caused the supplier to shut down its systems causing more than 9,500 U.S. gas stations to run out of fuel.

• Geopolitical: These risks stem from political instabilities, trade wars, tariffs, and changing regulations.

• Environmental: Natural disasters like earthquakes, hurricanes, and extreme weather events that can severely disrupt manufacturing processes, transportation, and logistics also impact the supply chain.

• Economic: These risks stem from economic downturns, demand fluctuations, or volatile commodity prices. This was a concern for almost every organization in the wake of the 2008 global financial crisis.

• Technological: Rapid technological advancements can render existing products or processes obsolete. In addition, cyber attacks or IT system failures can compromise a company’s supply chain integrity.

• Supplier: Any failure on a supplier’s side like filing for immediate bankruptcy can have cascading effects on an organization’s supply chain.

Essential Steps to Reduce Supply Chain Risks

A robust SCRM process entails taking these specific steps in a supply chain risk analysis:

1. Identify risks by recognizing potential internal and external factors that can affect the supply chain.
2. Assess risks by evaluating their impact and likelihood then prioritizing them based on their potential consequences.
3. Mitigate risks by developing strategies and actions to reduce or eliminate the potential impact of the greatest risks.
4. Implement strategies while ensuring they are aligned with your overall business objectives.
5. Regularly reassess your risk environment, monitor the effectiveness of the strategies you implemented, and make the necessary adjustments.

These steps are often encapsulated in an organization’s supply chain risk management framework.

Best Practices in Managing Supply Chain Risks

Managing supply chain risks is possible for organizations that follow certain best practices.

Source (News - Alert) Materials from Multiple Suppliers

Instead of relying on a handful of resource suppliers, identify and qualify alternative multiple suppliers in case issues (e.g., logistical or inventory) arise. The need for this best practice became evident during the pandemic when lockdowns were instituted, causing massive supply chain disruptions globally.

Establish Nearshore Options

While it’s true that many organizations reduce costs by obtaining resources from offshore suppliers, their orders are dependent on unpredictable factors like extreme weather conditions, natural disasters, and others. It is thus a good practice to have nearby options available should problems ensue.

Maintain Inventory Buffers

This practice has a lot to do with the “just in case approach.” Apart from identifying multiple sources and nearshore options who can pick up the slack when suppliers fail to deliver on time, it’s also beneficial to keep extra inventory on hand should your initial backup plans fall short.

Enhance Vendor Visibility

Vendor visibility goes beyond order tracking — it includes monitoring your suppliers’ security posture. A breach in their systems can quickly become your problem. As seen in the Silk Typhoon attack, stolen credentials from one vendor were used to infiltrate customer networks, impacting remote monitoring and management (RMM) providers, managed service providers (MSPs), healthcare organizations, government institutions, and more.

Utilize AI-Powered Solutions

Artificial intelligence (AI)-powered solutions can not only assuage productivity concerns by improving efficiency, they can also automatically detect unusual network traffic, unexpected system behaviors, anomalous user activities, unexplained data transfers, and compromised supplier communications, which are typical signs of an ongoing attack.

Perform Regular Risk Assessments

In light of the many supply chain risks any organization can face, assessing risks regularly has become crucial. While these assessments can be performed by internal audit teams or external auditors, it pays to rely on both approaches.

New processes and tools should be assessed before and after implementation, as they may introduce vulnerabilities into your existing IT supply chain. Current vendors should be reviewed at least annually to ensure they remain secure and reliable. Physical equipment must also be inspected routinely for flaws that could affect productivity or cause safety issues. In short, every part of the supply chain—digital and physical—should be examined regularly to prevent disruptions and attacks.

How Technology Is Transforming the Supply Chain Risk Management Process

Like any complex process, SCRM may not be as easy to do without the aid of technological tools.

Supply Chain Mapping Tools

These tools visualize and map an organization’s entire supply chain to provide a thorough understanding of the network. They make it possible to spot dependencies, weak points, and possible risks.

Risk Assessment Tools

These tools identify, assess, and prioritize hazards in the supply chain ecosystem. They help companies evaluate the possibility and effect of various hazards using algorithms and data analysis techniques. A concrete example would be attack surface management tools that scan for, identify, prioritize, and provide recommendations for hardware, software, and service (e.g., cloud) vulnerabilities.

Supplier Relationship Management Tools

These tools track performance, communication, and collaboration on a single dashboard, aiding organizations in managing relationships with suppliers. As a result, they can monitor supplier performance, assess compliance, and oversee contracts and agreements.

Demand Forecasting Tools

These tools can predict future demand based on market patterns, historical data, and statistical models aided by AI algorithms.

Code Verification Tools

These tools scan third-party code integrated into internal systems for vulnerabilities.

Incident Management Tools

These tools help companies respond to and handle problems or disturbances in the supply chain. They thus minimize interruptions by coordinating response activities and providing procedures, communication channels, and documentation capabilities.

Collaboration and Communication Tools

These tools help supply chain stakeholders collaborate and communicate more effectively through real-time information sharing, document collaboration, and coordination.

Navigating Supply Chain Risk Management Opportunities and Challenges

As supply chains grow more complex and interconnected, SCRM offers transformative potential—enhancing visibility, accelerating response time, and enabling proactive decision-making—through technologies like predictive analytics and automated alerts. However, implementation doesn’t come without challenges. High upfront investments, the need for specialized training, and the risk of overdependence on digital tools can hinder adoption.

As globalization ensues, supply chains will become more intricate, thus increasing the potential for disruption. That underscores the importance for robust SCRM strategies. Not only should organizations employ advanced software, practical tools, and continuous monitoring, but also prioritize proactive measures, diversification, and education. Only then can they ensure business continuity, resilience, and success even in the most volatile markets.