When you look at standards like IATF 16949 or ISO 9001, the requirements boil down to two essential elements: improving customer satisfaction and reducing risk.

They go hand in hand because effective risk management means safer products and happier customers—and fewer problems for their suppliers.

To help automotive suppliers proactively avoid quality and safety issues, we’re looking at four important places to focus on for improving risk management and reducing costs.

What is risk management?

The concept of risk is often misunderstood, as is risk management.

A risk is not the same thing as a hazard. Risk is defined as probability x impact of a given hazard, causing an unwanted event. Risk takes into account how likely an event is to occur as well as potential consequences:

Risk = Probability x Impact

Risk management is not the same as finding hazards or conducting a risk assessment. Risk management is a cyclical process involving:

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