Supplier Risk – In a globalized economy we can’t ignore the extended supply chain

Posted on September 14, 2017.

The other day I happened to be reading an interesting document that passed my desk. It was the Chartered Institute of Procurement & Supply (CIPS) Risk Index, which is produced in association with Dun & Bradstreet. The headline that caught my eye and the reason I downloaded the report in the first place was that the CIPS Risk Index (CRI) score had improved for the second straight quarter, indicating that risk within the cross-border supply chain had eased. However, on further reading, I noticed that while the risk score has stabilized, it is still largely at an all-time high.

This set me thinking. Do we live in a more risky world, or do we just know more about the risks? Reading through the report, which is published quarterly and examines each geographic region giving a summary, I was struck by just how much geopolitical turmoil there is in the world, and how that impacts on almost every business. Risk is no longer contained within the confines of the business, if indeed it ever was, and with the ever-extending supply chain, no business can control all of the risks they may face.

With the increasing drive for efficiency, to do more with less, trim costs, and maintain competitive advantage, business is now ultra-connected but also more vulnerable to disruptions. In contracting the best deal with suppliers, do you have visibility of your supplier’s suppliers? You may think that your goods are manufactured in one country without realizing that some elements are actually being shipped in from elsewhere. It is paramount that organizations understand the risks hidden within the extended supply chain, and the effect that any failure may have on the business, on brand reputation and customer relations.

Supply chain vulnerabilities can be identified by supply chain mapping and ‘what if’ exercises. In addition, an enterprise risk management platform, that is quick and easy for business managers and risk owners to use, that stores all risk information centrally is a big step towards quantifying and mitigating those vulnerabilities. Rolling out the same risk management solution to your suppliers will give you an even better chance of managing risk out to the perimeter of the extended supply chain.