(Supply Chain) Risk is on the Rise … But You Can Do Something About It

A couple of months ago Marsh released a research report on Stemming the Rising Tide of Supply Chain Risks: How Risk Managers’ Roles and Responsibilities are Changing. Although it started off by telling us what we already know, that risk has risen substantially in global supply chains over the last three years, it served to quantify the extreme degree to which risk has risen, with 73% of companies experiencing an increased supply chain risk level and 71% of companies experiencing an increased financial impact from supply chain disruptions (based on a survey of 110 risk management professionals in January and February of 2008).

Furthermore, even though 35% reported that supply chain risk management was moderately effective at their company, not a single respondent said that their risk management practices were highly effective. And 24% said that they still have no formal process to address risk! Considering that a single supply chain disaster could force a company to file for bankruptcy (or at least bankruptcy protection) in today’s market, this is not a good situation!

In addition, the study did a good job of pointing out that natural disasters are not your biggest risk factors. According to the study, the four biggest risk factors were pricing risks, supplier (& supplier delay) risks, risks within your own plants, warehouses, and stores (which, I’d like to remind you, includes fraud risks), and logistics disruptions. Natural disasters are always a threat, but they’re relatively rare, whereas all of the other types of risk are constant.

But there are things you can do. You can:

  • take a strategic role in mobilizing the company against risks,
  • work with risk managers to ensure risk processes are designed cross-functionality and end-to-end (like good end-to-end e-Procurement), and
  • innovate.

And since innovators tend to be top performers, it’s always a great strategy. For more strategies for success, as well as steps you can take to become a top performer, I recommend checking out the full report (registration required). It’s definitely worth a read.

And for more information on risk management, be sure to check out the other posts on the topic here on the Sourcing Innovation blog, over on e-Sourcing Forum, and the wiki-paper on the e-Sourcing Wiki.