Which of the following best describes supply chain risk management?

Supply chain risk management is fundamentally about identifying, assessing, and mitigating potential risks that could disrupt the flow of goods and services within the supply chain. This involves looking at various factors that could create vulnerabilities—such as natural disasters, supplier failures, or geopolitical instability—and establishing strategies to minimize the impact of these disruptions.

Choosing this approach allows businesses to prepare for uncertainties, ensuring they can maintain operations and meet customer demands even in adverse situations. Where many organizations fall short is in proactively managing these risks rather than merely reacting to them when they occur.

The other options, while important in their own right, do not capture the essence of supply chain risk management. For instance, analyzing customer preferences is more focused on market research and customer satisfaction rather than on risk mitigation. Similarly, enhancing labor relations and reducing manufacturing costs pertain to operational efficiency and workforce management, not directly to the process of anticipating and managing risks within the supply chain. Therefore, option B most accurately describes the critical function of risk management in the context of supply chains.