Term · Risks & Red Flags
Supply Chain Risk
In briefSupply chain risk is the danger that disruptions in the supply chain impair production, costs or ability to deliver, for example through supplier failures, raw material shortages or geopolitical tensions. Small companies with few sources of supply and low bargaining power are especially vulnerable.
Definition
Supply chain risk refers to the danger that disruptions in the supply chain impair a company's production, costs or ability to deliver. Causes can include the failure of individual suppliers, geopolitical tensions, raw material shortages or logistics problems. The risk rises with dependence on few sources or regions.
Why it matters for small caps
Small companies often have fewer alternative suppliers and lower bargaining power, so supply chain disruptions hit them harder. High supplier concentration additionally aggravates supply chain risk.
Common misreadings
- Supply chain risk is narrowed down to supplier failures, even though it also covers raw material, logistics and geopolitical disruptions.
In the process
Frequently asked
What are typical causes of supply chain risk?
Supplier failures, raw material shortages, logistics and transport problems, and geopolitical tensions and trade restrictions.
Why are small companies more affected?
They often have fewer alternative suppliers and lower bargaining power, so disruptions are harder to offset.
How does it relate to supplier concentration?
The more purchasing is concentrated on few suppliers or regions, the greater the vulnerability to disruptions.
Related terms
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.