CIPS L5M2 Managing Risk in the Supply Chain - Key Definitions

Word Definition
Acceptance A formal indication that goods conform to the purchaser's requirements.
Battle of the forms When both buyer and suppliker attempt to form the contract on their own terms and conditions.
Black swan event An occurrence or event that is extremly unusual and therfore difficult to predict.
An organisation's identity; cold be linked to a logo, colour, etc. It helpsto differentiate the organsiatoin from tis
Brand competitors.
Brand Equity The concept that branding is a major contributing factor in consumer decisions

A promise or the giving or receiving of a financial or other benefit to induce or reward the improper perforamnce of a
Bribery position of trust, or a function that is expected to be performed impartially or in good faith. - The UK Bribery Act 2010
Bribrary - Methods for
eliminating Four T's (Tolerate, Treat, Transfer and Terminate)
Business Continuity Plans
(BCP) Top-level business plans that enable organsiations to deal with critical events withteh least possible disruption.
Claims adjuster A perosn who determines the valididity and settlement value when an insurance claim is being made.
Collusion The co-operation of parties in order to carry out fraudulent activity
A set of actions to deploy when the organisation faces an incident or needs to take an alternative course of action. A
systems-specific planning process using a standard methodology to determine critical activities that will take place in
Contingency plan the event of a risk event occuring.
Corporate Governance The system by which organsiations are directed and controlled.
Corporate risks Risks that an onrgansiation faces at the very top level.
Corporate Social An organisation taking responsibility for the impacts of its action and decisions on society and the environnment;
Responsibility (CSR) refers to an organsiation exceeding its legal obligations thorugh its ethical behaviour.
Corruption The misuse of resources or power for private gain.
Pricing agreements where the supplier is paid for agreed costs incurred plus an agreed percentage or amount on top
Cost-Plus arrangement to allow for profit.
Credit Rating A score given to an organsiation which is based on the amont of risk it poses to a creditor.
Credit Watch List A tool used by credit rating agencies to give notification of a re-evaluation of an organisation's credit rating.
Defect Liability Period A period of time after completion of a project during which a contractor is liable for dealing with defects.
Direct Loss Loss arises directly from the risk event
Disaster Recovery Restoring the essential systems to allow business critical processes to take place following a major incident
Policies and procedures to help a business provide continuity of vital infrastructure following a disastrous event. A key
Disaster Recovery Plan part of business continuity plans where each function or area often business that is deemed to be critical to operations
(DRP) has its own step-by-step plan in the event of a disaster occurring.
Effect A positive or negative deviation from what is expected.
Embezzlement The fraudulent misappropriation or stealing of assets
 Recognised social principles that involve justice and fairness throughout the business relationship; being ethical means
following a behaviour perceived as fair by the business community and wider society. Ethics are subject to different
Ethics levels; individual, organisation and macro.
A risk that has happened. it is no longer considered to be a risk, but the consequences of the event will still need to be
Event (or issue) managed.
Extortion The practice of obtaining money or other benefits through the use of threat.
Factoring A way for businesses to fund cash flow by selling their invoices (normally to a bank)
An event which could not be reasonably predicted and is outside of the parties control and makes it materially
Force Majeure impossible to fulfil the obligations of the party or parties under the contract.

An intentional deceptive action. Different types of fraud: (1) Procurement fraud (2) Bribery (3) Assets (4) Intellectual
Fraud Property (5) Counterfeiting (6) Publishing of incorrect financial statements (7) Falsification of expenses claims.
Greenwashing The practice of using corporate social responsibility as a marketing campaign to cover unethical practices.
Hazard Source of potential harm or a risk source. Hazard can be referred to as Health and Safety Issues.
Hazard Source of potential harm or risk source.
Hedging Using a financial instrument to offset the potential risk of an adverse loss.
Impact The effect a risk event has on the supply chain or organisation.
Indemnities An arrangement where one party promise to compensate another party for a trigger event.
Indirect Loss Consequential loss - related to the risk event but not as easy to link.

Insolvency Where an organisation cannot raise enough cash to meet its obligations or pay debts as they become due for payment.
Inspection The act of examining goods to determine whether they are as specified and undamaged.
Intellectual property Unique creations of the mind. For example; inventions, literary and artistic works, designs, symbols and images.
Key Performance A quantifiable measure that can be used to assess performance over time. Often in supplier contracts KPIs will be set
Indicators (KPIs) around many factors such as quality, cost and delivery.
Last Shot Principle Where the last document sent in negotiating a contract before performance is the governing document.
Lean A business methodology that aims to create more value with fewer resources.
Liability The legal responsibility for an action or inaction.
The process of understanding all costs that an asset will incur over its lifespan. This can include costs such as
Life-Cycle Costing acquisition, running and disposal.
The flow of funds, goods and information between origin and consumption. It involves information, material handling,
Logistics production, packaging, inventory, transportation, warehousing and often security.
Mean Average calculated by adding up everything and then dividing by how many.
Take an action to reduce the likelihood and/or impact of the risk event. For example, keeping safety/buffer stock
Mitigate mitigates the impact of late supplier deliveries.
The most common type of distribution pattern. It involves arrangement of a data set in which most value occur
Normal Distribution towards the middle (the mean) of the range.
Offshoring The practice of locating some business processes overseas in order to take advantage of lower cost.
 Taking an operation / process / function that the procurement organisation has previously undertaken itself and using
Outsourcing a supplier under contract to delivery instead E.g. Customer Service
People - The social element of sustainability; the protection of people from harmful activities of organisations Profit -
People, Profit and Planet economics element of sustainability. Plant - environmental aspect of sustainability.
The probability of outcomes in discrete events within a continuous stream of events This is often used where there is a
small probability of an unwanted outcome occurring in a single event but there are a large number of events, thus
Poisson Distribution increasing the probability that the event will occur at some point
Pre-Condition a condition that must be fulfilled before other things can happen or be done.
Probability The likelihood of an event occurring
Quality Assurance The focus on assuring quality upfront and getting the processes and products right from the very start.
Quality control The focus on the correction and detection of defects and includes appraisal costs.
The Risk that remains after efforts have been taken to reduce the likelihood and impact of the risk through risk
Residual risk management activities.
Reverse Logistics All operations related to the reuse of products and materials.
Risk Effect of uncertainty objectives (Effect - a deviation from what is expected - positive or negative)
Risk The effect of uncertainty on an objective
Risk Appetite The level of risk that an individual or organisation is comfortable taking. (Agreed risk levels)
Risk Appetite The level of risk that an individual or organisation is comfortable taking.
Risk Exposure The measure of potential future loss arising from risk
Risk exposure The measure of potential future loss arising form risk
A methodical process to identify, record, assess and treat organisational risks. Risk management is a continuous
Risk Management
process.
Risk Management A methodical process to identify, record, assess and treat organisational risks.
Root Cause Analysis Any approach or technique which is used to get to the cause of quality issues.
Separation of duties The concept of requiring more than one person to complete an end-to-end task. It is an internal control intended to
(SoD) prevent fraud and error.
Service Level Agreement Document outlining the expected minimum level of service between service provider and a client. It clarifies the scope
(SLA) of the service, responsibilities of each party and how to escalate among other factors.
Statistical data Is information that is recorded in relation to studies of large quantities of numerical data.
A branch of science or mathematics concerned with the collection, classification, analysis and interpretation of
Statistics numerical facts and data.
Subjective Measures Measures taken that rely on personal opinion and interpretation rather than the assessment of facts and data.
The unexpected loss of a supplier, perhaps through a supplier opting not to work with a particular customer any longer
Supplier Attribution or a result of financial instability leading to insolvency.
The unexpected loss of a supplier, perhaps through a supplier opting not to work with a particular customer any longer
Supplier attrition
or as a result of financial instability leading to insolvency.
The system of directing the behaviours and decisions of procurement within an organisation via legislative, executive
Supply Chain Governance and judicial processes (CIPS)
Supply Chain Operations The management of organisational inputs and the transformation of inputs into outputs across the entire supply chain.
Supply chain An organisation's level of exposure to disturbances to the continuity of operational that arise form risks both within
vulnerability and external to the supply chain.
Development that meets the needs of the present without compromising the ability of future generations to meet
Sustainability their own needs
Testing The act of using goods in situ to determine whether they function correctly and are fit for purpose.
The Sarbanes-Oxley
regulation (SOX) Dictates that any organisation that is publically trading in the USA must comply with its rule.
Underwriting Determining the task, cover and premium value when an insurance application is being assessed
A statistical measure that quantifies financial risk levels within an organisation, product portfolio or supply chain
Value at Risk (VaR) position over a particular timeframe.