ASSESSMENT OF SUPPLIER RISK FOR COPPER PROCUREMENT

Abstract

Procurement risk management (PRM) requires a good understanding and assessment of all potential risks. As the procurement industrymostly functions globally and the supplyñdemand chain forms a dependencystructure among all interested parties, the quantiÖcation of risks related to thesuppliers gain importance. This study presents a systematic PRM to evaluateand quantify the risks of a commodity associated to its suppliers. The probabilistic set up using total probability theorem on the information collected usingrisk management tools, such as expert opinion, charts, survey and historicalrealizations are imposed to quantify the risks. The resulting probabilities areutilized to construct a risk matrix which illustrates the performance of eachsupplier at every potential risk source. An application to a copper procurement as case study is done based on the risk management process evaluation.The quantiÖcation of the supplierís risk with respect to a risk ranking illustration in copper procurement is exposed to indicate the e§ectiveness of themethodology and the necessity of such evaluation in decision making.