Mitigating Supply Chain Risk
Supply chains are backbones of the global economy and disruptions are costly in many ways.
These disruptions not only have immediate financial impact but can have long term consequences for brands. According to Accenture, significant supply chain disruptions have been found to cut the share price of impacted companies by 7% on average. It’s not surprising that Accenture also found that more than 80% of companies are now concerned about supply chain resilience.
Natural disasters and extreme weather are not the only threats to supply chains. Political unrest, oil dependence and information fragmentation also pose risks. Of emerging non-traditional risks, cyber risk is perceived to have the greatest implications for supply chains. These risks along with rising insurance and trade finance costs are leading supply chain experts to explore new mitigation options.
All this calls for a better strategy around resilience to build agile, transparent and diversified systems. The World Economic Forum report Building Supply Chain Resilience published in collaboration with Accenture offers a blueprint for resilience through public private partnerships, policy, strategy and IT. This report explores government and industry sector views on systemic supply chain risks and building a resilience framework to manage them.
Preventing your suppliers’ vulnerabilities from becoming your own
In addition, a recent report titled Securing the Supply Chain by the Information Security Forum (ISF) found that while organizations go to great lengths to secure intellectual property and other sensitive information internally, the security of information shared across their supply chain, security is only as strong as the weakest link.
“Supply chains are inherently insecure and organizations create unintended information risk when sharing information with their suppliers,” said Michael de Crespigny, Chief Executive Officer, ISF. “There is a “black hole” of undefined supply chain information risk in many organizations – they understand and manage this risk internally but have difficulty identifying and managing this risk across their hundreds or thousands of suppliers.
How can you collaborate with suppliers without exposing your firm to additional risk? The report suggests considering the nature of your supply chain, determine what information is shared and assess the probability and impact of potential compromises. Organizations can then address information risk management and integrate it into their procurement and vendor management processes.
Some steps to improving supply chain resilience are:
–Building a culture of risk management across suppliers
–Improving alert and warning systems
–Identifying and eliminating of supply chain bottlenecks
–Improving information sharing between government and industry
Firms that undertake such measures as part of a blueprint for supply chain resilience will be in a better position to bounce back from potential disruptions and gain competitive advantage.
