A Comprehensive Approach
Because we are a conservation organization, our process factors in public policy, environmental issues and social externalities, including pressing challenges like climate change, water stress, biodiversity loss, corruption, and impacts to indigenous groups. During our assessment, we compare and quantify risks across commodities and geographical regions and assign risk scores to indicators. The risk score increases as the probability of occurrence and severity of impact increase; a higher score implies a higher probability of occurrence and severity of impact. Thus, a company can easily identify where there are areas of high risk and prioritize mitigation strategies.
The Supply Risk Analysis clarifies where businesses have their biggest potential impacts as well as risks associated with sourcing commodities from defined geographical areas. This framework can also be used to compare risks across multiple commodities and assist in prioritization of sustainability efforts.
The Supply Risk Analysis is a framework used to:
- Evaluate risks and potential impacts associated with commodities sourced or financed by companies
- Identify where the risks are greatest
- Highlight where companies can focus their efforts to best mitigate the supply risks
It is structured into four macro risk themes:
- Supply Security & Governance
- Economic & Financial
To deduce risk, more than 50 indicators are weighted across 30 criteria within these four themes. For the commodity and geography of sourcing, risk is evaluated at the indicator level based on probability of occurrence and severity of threat as denoted in the matrix below.
|A. Common Occurrence||B. Known to Occur||C. Could Occur||D. Not Expected to Occur||E. Extremely Unlikely to Occur|
|1. Severe Threat||25||24||22||19||15|
|2. Major Impact||23||21||18||14||10|
|3. Moderate Impact||20||17||13||9||6|
|4. Minor Impact||16||12||8||5||3|
|5. Insignificant Impact||11||7||4||2||1|