API SPECIFICATION Q1 TENTH EDITION RISK MANAGEMENT CLAUSE (5.3) CLARIFICATIONS

[SANTHSH]

Dear Esteemed Forum Members,

Could you please clarify our understanding of the following clauses?

Clause 5.3.1: e) Assessment of remaining risk. f) Contingency planning, including when a contingency plan is required based on the assessment of remaining risks.

For example, suppose we identify a major risk: "Non-Availability of input raw materials at the right time to meet production requirements," with a risk score of 70/100. (Our risk categories are defined as follows: 1) minor - score less than 50, 2) major – score 50 to 70, and 3) critical - score above 70.)

To mitigate this risk, we have implemented various mitigation plans, such as maintaining an ongoing rate contract agreement with approved suppliers and establishing an advance stocking plan. Additionally, we have developed contingency plans, including direct procurement from alternate sources in case of delivery failure by the original supplier and substitution with higher grade/specification materials.

Our understanding is that even after implementing mitigation and contingency plans, if the risk score decreases to, say, 60/100 upon reassessment after six months, the risk still remains significant (i.e., it remains a major risk). Therefore, we believe it is necessary to enhance our mitigation and contingency strategies and re-evaluate the risk after another six months to determine if it has decreased further.

If our interpretation is incorrect, we would appreciate further clarification on how these clauses should be interpreted.

Thank you for your assistance.

 

[RNurhadi]

Dear Esteemed Forum Members,

Could you please clarify our understanding of the following clauses?

Clause 5.3.1: e) Assessment of remaining risk. f) Contingency planning, including when a contingency plan is required based on the assessment of remaining risks.

For example, suppose we identify a major risk: "Non-Availability of input raw materials at the right time to meet production requirements," with a risk score of 70/100. (Our risk categories are defined as follows: 1) minor - score less than 50, 2) major – score 50 to 70, and 3) critical - score above 70.)

To mitigate this risk, we have implemented various mitigation plans, such as maintaining an ongoing rate contract agreement with approved suppliers and establishing an advance stocking plan. Additionally, we have developed contingency plans, including direct procurement from alternate sources in case of delivery failure by the original supplier and substitution with higher grade/specification materials.

Our understanding is that even after implementing mitigation and contingency plans, if the risk score decreases to, say, 60/100 upon reassessment after six months, the risk still remains significant (i.e., it remains a major risk). Therefore, we believe it is necessary to enhance our mitigation and contingency strategies and re-evaluate the risk after another six months to determine if it has decreased further.

If our interpretation is incorrect, we would appreciate further clarification on how these clauses should be interpreted.

Thank you for your assistance.

hi santhsh, from what we do, if you already trying to mitigate the risk, and those risk score is still ( in your case : major ), then i think you should exercise more on the residual risk scoring would be affected your product quality and product delivery

 

[SANTHSH]

Whether 'remaining risk' as per API is same as 'residual risk' in ISO 9001:2015 ?

 

[deepak12]

Whether 'remaining risk' as per API is same as 'residual risk' in ISO 9001:2015 ?
Answer is Yes

For Example :

The manufacturing company procures raw material from a supplier in East Asia. They face risks such as political instability and natural disasters.

1. Raw Material Procurement:
   • The company procures raw material from three different suppliers located in A, B, and C to mitigate the risk of dependency on a single supplier.
   • They negotiate contracts with each supplier ensuring they meet the required quality standards and delivery schedules.
2. Assessment of Remaining Risk:
   • Despite the diversification, there's a risk that a major geopolitical event could disrupt the supply from all three different location.
   • The remaining risk is assessed as moderate because, while the likelihood of all three regions being simultaneously affected is low, the impact on production would be high.
3. Contingency Planning:
   • The company develops a contingency plan that includes:
     • Maintaining a six-week inventory of raw material.
     • Identifying alternative suppliers in other regions (e.g., D, E) who can provide raw materials at short notice.
     • Establishing a rapid-response team to manage logistics and supply chain adjustments.
   • The contingency plan is to be activated if any two of the three suppliers report potential supply disruptions of more than two weeks or if geopolitical tensions in the A, B & C region escalate significantly.

 

[SANTHSH]

As per clause 5.3.2.3 c) MOC & risk assessment has to be done changes in the supply chain of critical products, components, or activities. Earlier it used to be suppliers.

Does this mean we have to monitor the supplier changes of our registered suppliers.

 

[deepak12]

As per clause 5.3.2.3 c) MOC & risk assessment has to be done changes in the supply chain of critical products, components, or activities. Earlier it used to be suppliers.

Does this mean we have to monitor the supplier changes of our registered suppliers.

Yes, you are required to monitor changes in your suppliers and the changes within the entire supply chain (including sub-suppliers) for critical products, components, or activities. This ensures that any changes, such as a new sub-supplier, alternate manufacturing process, or change in material sourcing, are assessed for potential risks to product quality and compliance.


This broader supply chain monitoring helps to mitigate risks and ensures that you can act quickly to assess the potential impact of those changes, raising a Management of Change (MOC) and performing a risk assessment if necessary.

 

[ros215011]

Yes, you are required to monitor changes in your suppliers and the changes within the entire supply chain (including sub-suppliers) for critical products, components, or activities. This ensures that any changes, such as a new sub-supplier, alternate manufacturing process, or change in material sourcing, are assessed for potential risks to product quality and compliance.


This broader supply chain monitoring helps to mitigate risks and ensures that you can act quickly to assess the potential impact of those changes, raising a Management of Change (MOC) and performing a risk assessment if necessary.

Hi Deepak12,
thanks for your explanation but could you make clear based on illustrate below?
my company ABC bought critical material on vendor EFG and based on vendor evaluation control supply chain of EFG which the EFG have 3 sub-vendors are XYZ, SRT, MNO. based on consideration of my company ABC, the critical sub-vendor only XYZ so we will raise MOC when the change for XYZ instead of all 3 sub-vendors. what do you think?