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14 September 2018

Supply Chain Risk Management

Supply Chain Risk Management
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Supply chain risk management is a top priority for organisations committed to ensuring the resilience of their supply chain in their efforts to achieve their strategic objectives. Yet despite the fact that organisations can lose millions because of cost volatility, supply disruption, non-compliance fines and incidents that cause damage to their brand and reputation this focus still does not apply to all.

In this article, Gallagher looks at the results of the Business Continuity Institute Supply Chain Resilience Report 2017 and the impact this could have on your organisation. Also discussed is how risk management can help to secure your organisation’s supply chain risk.

Global supply chains are dynamic, continually growing in size and complexity and vulnerable to an increasing number of threats; however in spite of all this, few firms have full visibility of their supply chain or record incidents that impact it. The Business Continuity Institute Supply Chain Resilience Report 2017 (BCI SCR) – a yearly report which investigates these issues - states that 69% of firms do not have full visibility of their supply chains.

The Report further states that over the previous 12 months:

  • 65% of organisations experienced at least one instance of supply chain disruption
  • 44% of those disruptions came from tier 1 suppliers
  • 22% of firms do not analyse the source of disruption

Whilst an organisation quite rightly continues to seek to maximise trade through modernisation of their supply chain infrastructures and processes it needs to also focus on the increasing vulnerabilities, threats and hazards that come with the continued globalisation and complexity of supply chains or suffer the consequences. The BCI SCR 2017 records that the top consequences of disruption are:

  • Loss of Productivity 55%
  • Increase cost of working 46%
  • Customer complaints 43%

With threats and disruptions coming from unplanned IT outages, cyber-attacks, data breaches, and transport network disruptions to name a few, it is clear that understanding and accurately quantifying business interruption and supply chain exposures is a challenge that needs to be tackled to mitigate the consequences of disruption. Consider, how much profit could your organisation lose through loss of productivity? How could your reputation be impacted if you can’t fulfil your order books or deliver service to your customers?

Looking to the future, many organisations anticipate acts of terrorism, product quality and health and safety incidents – problems which could affect any size or type of organisation – to cause future disruption. These are events which cannot always be predicted or prevented, and can have significant financial and reputational damage. We can also expect Brexit to trigger new laws and regulations, which will require your organisation to react and adapt to change, as well as affecting your supply chain.

Supply chain is a vital part of organisation growth and needs focus and protection as much as physical assets and employees

Our Conclusions

Gallagher’s team can help you to more fully understand the exposures to your supply chain through a comprehensive and thorough analysis that will enable you to;

  • Understand the key risk exposures within your supply chain and also that of your key suppliers
  • Provide a risk management plan to help reduce exposures to your organisation
  • Implement and monitor the plan
  • Provide risk transfer options for the critical risk identified

While you cannot control your suppliers, you can limit the impact that they have on your business should a disruption or insolvency occur. To find out more about supply chain risk management, please get in touch with your usual Gallagher representative.

Download the Supply chain risk management.pdf

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