Operational risk is the risk that one or more future events will impair the effectiveness or viability of the business model in achieving expected financial results and creating sustainable value for customers and stakeholders. One important source of operational risk relates to the organizations, people, processes and resources that make up the supply chain. In many sectors, companies increasingly depend on the external elements of the supply chain as organizations seek to cut costs while increasing capabilities and global reach.
Every business, whether it handles financial contracts, natural resources, raw materials or components, is dependent upon a well-functioning, cost-effective supply chain. The board, therefore, should consider its oversight of supply chain risks.