How to record board acceptance of China sourcing risk
Record what remains unresolved, why the exposure fits the board's risk appetite, which alternatives were rejected, and who owns the controls. Limit approval to a defined scope and expiry, with triggers for reopening it. China-side evidence can be gathered by Cambridge China Bridge.
Define exactly what the board is accepting
HM Treasury's Orange Book is guidance for government organisations. It recommends recording, communicating and validating risk evaluations. The decision record below is a practical adaptation for a business buyer, with expiry and reopening arrangements proposed here for China sourcing.
Describe the cause, possible event and business consequence: for example, an unqualified backup factory could leave a product unavailable if the current supplier stops production. State the evidence, remaining uncertainty and controls already operating. Use the supply-chain resilience guide for mitigation work; this record captures the exposure left afterwards.
Make the risk-appetite boundary visible
Name the business objective and the relevant board-approved appetite statement. Explain whether the remaining exposure falls within it, using the same criteria the board uses elsewhere. Consider the combined exposure across affected orders, products and customers. A label such as “medium risk” is insufficient without explaining what the business is willing and able to absorb.
If the exposure exceeds that boundary, record the departure explicitly and identify who can authorise it under your governance arrangements. Specify its scope, rationale and additional controls. Do not quietly rewrite the appetite statement to make the order fit. Keep unresolved compliance questions outside this commercial acceptance route and seek appropriate specialist advice.
Explain why alternatives were rejected
Compare acceptance with postponing or stopping the order, reducing the commitment, changing the product, qualifying another supplier and improving controls. For each realistic option, record the evidence considered, expected benefit, cost or operational drawback, and why it was rejected now. Identify assumptions that could change that conclusion.
A cheap quote does not establish a usable replacement factory. Link supporting work from the second-supplier qualification guide. Where an alternative was rejected because evidence was missing, name the missing evidence and who will obtain it. Separate an unavailable option from an option the board considered and declined.
Put ownership and limits into the decision record
Attach the evidence pack to the board paper and reference its version in the minutes. Name the accountable business owner, the people delivering each control, the approving body and any dissent or conditions. Give the owner authority and resources to act. A sourcing provider can supply evidence; the buyer should retain accountability for accepting its business exposure.
Use the fields below as a drafting checklist. Distinguish permission to carry the remaining risk from permission to place an order or release payment. Connect implementation to your order and payment approval controls. Record who receives the decision and checks that its conditions are met.
| Field | What to record |
|---|---|
| Decision and scope | Affected supplier, product, orders and permitted commitments |
| Remaining exposure | Cause, event, consequence, evidence gaps and existing controls |
| Appetite boundary | Applicable appetite statement, assessment and any authorised departure |
| Rejected alternatives | Options, evidence, rejection reasons and assumptions |
| Accountability | Named owner, control owners, authority, resources and approver |
| Expiry | Calendar date or defined event, whichever occurs first, and renewal authority |
| Reopening | Triggers, reporting route, interim restrictions and next decision |
Expire approval and reopen it when facts change
Set an explicit expiry date and any earlier event that ends approval, such as completion of the covered order or a supplier change. Set a review date early enough to decide before expiry. Require fresh approval for renewal, supported by current evidence. State what happens meanwhile, including which new commitments or payment releases must wait.
Define observable triggers: a failed inspection, undisclosed subcontracting, a missed production milestone, changed deposit terms, loss of a control or new evidence that exceeds the appetite boundary. Name who reports each trigger, to whom and how promptly. Specify interim containment and the decision needed to resume. Keep the risk open in the register while acceptance remains in force.
Frequently asked questions
What should board minutes say when accepting a sourcing risk?
Record the remaining exposure, appetite assessment, rejected alternatives, named owner, controls, scope, expiry and reopening triggers. Reference the evidence pack and capture approval conditions and dissent.
Can a board accept risk above its risk appetite?
Identify the departure explicitly and check who can authorise it under your governance arrangements. Record the reason, scope, controls and expiry. Keep unresolved compliance questions outside the commercial acceptance route.
When should China sourcing risk acceptance expire?
Choose a calendar date and any earlier ending event suited to the exposure. Review before expiry and require fresh approval for renewal. State which commitments must wait if approval lapses.
Who owns an accepted supplier risk?
Name an accountable business owner with authority and resources to act. Allocate control tasks separately. Factory checks by a sourcing provider support the buyer's decision; they do not replace the buyer's risk owner.