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INTERNATIONAL COMMENTARY
“Supply Chain Failures Show Up in Survey On
Top Ten Risks Around the World”
In a rapidly changing and increasingly challenging world, every
organization is facing more complex risks that carry greater severity.
The ability to understand, track and adjust to worldwide trends
can mean the difference between success and failure.
Aon worked with leading organizations around the world in more
than 40 countries and across 31 industries to find out their views
of emerging and escalating business risks, and the steps they
are taking to address these challenges. Our experts have since
studied and analyzed the findings, and compiled the “2009
Global Risk Management Survey” report.
According to the survey respondents, the Top 10 most pressing
risks are:
1. Economic slowdown
2. Regulatory/legislative changes
3. Business interruption
4. Increasing competition
5. Commodity price risk
6. Damage to reputation
7. Cash flow/liquidity risk
8. Distribution or supply chain failure
9. Third-party liability
10. Failure to attract or retain top talent
Analysts asked business leaders from more than 40 countries across
31 industries to describe their risk management functions, share
how they identify and assess risk, and detail the ways in which
they and their boards of directors approach risk management.
Here’s what they said about supply chain management risk:
Respondents linked it to business interruption and commodity
risks, ranks eighth in an uncertain global economy where the risk
of supply chain disruption and delay is increasingly common and
can create dramatic problems for organizations across industries.
Organizations with complex supply chains often find it difficult
to assess the nature of their risk exposures, especially in a
fast-moving environment. The growing complexity of global supply
chain interactions and rapid developments in technology are widening
the range of supply chain risk issues . Internal and external
supply chain risks threaten business continuity and complicate
the management of supply chain vulnerability
While many consider supply chain risk management to apply solely
to manufacturing organizations, it is important to recognize that
service organizations are not immune to this risk. These organizations
are at risk through potential break downs in policies, procedures,
technology and communication systems, as well as the risks associated
with human capital. A number of major trends continue to highlight
the importance of supply chain management:
-Offshoring and outsourcing: To meet investor growth and performance
expectations, there has been tremendous pressure in the corporate
world to reduce expenses and remove underperforming assets and
operations from business portfolios.
-Lean sourcing: focus on supply chains for the past 10 years
centered mainly on business process optimization through six sigma
or other evaluation processes.
-Reductions and consolidation of supplier base: In an effort
to drive down the costs of raw materials, organizations have consolidated
their supplier base. In addition, mergers and acquisitions of
suppliers have also decreased the number of vendors on which organizations
rely.
-Reliance on technology: More than ever before, manufacturing
and service organizations are dependent on technology, including
internet and intranet access, and various modes of communication.
Targeted risk assessments are an integral aspect of managing
supply chains in the current economic environment. Mapping the
supply chain to understand interrelationships, manufacturing processes
and services procedures will help identify and prioritize potential
supply chain risks. These risks can arise from a number of different
areas, including single and sole source suppliers; the ability
to attract and retain the right human resources; property and
casualty risks; equipment, process or procedure failure; and counterfeit
and tampering risks.
Many organizations are using the information gleaned from risk
mapping and assessment to develop risk quantification models around
their supply chain risk. These models not only provide insight
into the magnitude of potential events but also allow for the
consistent and quantitative cost–versus–benefit evaluation
of various mitigation strategies that may include diversification
of location and suppliers, business continuity planning, hedging,
and enhancements to technology .
Companies today are running leaner operations. Tight credit,
just-in-time inventories and smaller staffs all contribute to
potential supply chain disruption or delay. Pro-actively designing
supply chains to be resilient is a key strategy for managing risk
in a rapidly changing environment.
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