Risk: The Missing Metric in S&OP

When leaders open an S&OP or IBP report, they expect to see the usual suspects: forecast accuracy, volume vs. plan, revenue vs. budget, and margin outlook. These metrics matter, but they miss one of the most important dimensions of planning: risk.

The Blind Spot in S&OP

Most S&OP cycles are designed to answer: “What will we sell? What will we make?” But they rarely answer: “What could go wrong if we’re wrong?”

That’s where the risk lens come in. Over-forecasting inflates inventory, increases write-offs, and ties up working capital. Under-forecasting leads to lost sales, service failures, and credibility loss with customers. Both sides of the error equation carry a financial and operational exposure that’s often invisible in the standard deck.

Why Risk Matters More Than Accuracy

Consider two markets:

Market A hits 92% forecast accuracy but consistently under-forecasts its fastest-growing SKU. Shelves go empty, competitors gain share.

Market B only achieves 80% accuracy but flags a $300k exposure in excess stock early, adjusts supply, and prevents a write-off.

Which market added more value? The second. Because in the end, the real question is not how accurate was the forecast? but what did we do about the risks it created?

How to Make Risk Visible in S&OP

Forward-looking organizations are embedding risk as a core part of their S&OP routines:

• Track Exposure, Not Just Variance

  Translate forecast gaps into potential service loss or financial write-offs.

  Example: “20% under-forecast = 500k unit cases unmet = $2M potential lost sales.”

• Use Provisions as a Signal

  Work with Finance to understand provisions booked against excess or obsolete inventory. Provisions make the risk real by showing what is already hitting the P&L.

• Set Risk Thresholds

  Just as companies set accuracy targets, set thresholds for exposure (for example, escalate if exposure > $5M or service risk > 10%).

• Put Risk on Page One

  Do not hide it at the back of the pack. Risk should open the meeting, not close it.

A Real-World Example

At IBP2, we worked with a client where risk to write-offs in innovation launches often ran into hundreds of thousands. By introducing risk watchlists, simple dashboards that flagged SKUs with high exposure or service risk, leadership was able to act earlier. In one case, a potential write-off in the hundreds of thousands was reduced to less than 100 simply because the risk was made visible and discussed in the cycle.

Final Thought

S&OP isn’t just about accuracy, volume, or revenue. It’s about making better trade-offs. And you can’t make better trade-offs if you can’t see the risk.

Forecast accuracy tells you how close you were. Risk tells you what it cost you.

✅ At IBP2, we help organizations bring risk into the heart of their IBP routines by tracking exposure, provisions, and decision impact, so that planning becomes not just about predicting the future but preparing for it.