The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.
John Bree, Chief Evangelist and Chief Risk Officer, Supply Wisdom
The global economic slowdown is putting additional strain on resources and forcing cutbacks in staffing and risk avoidance program funding. At the same time, upheaval in local economies is creating additional unforeseen disruptions, such as strikes, protests, and political unrest. These require companies to employ additional risk monitoring. Companies are having to do more with less and must focus on identifying impending risk issues as early as possible to avoid costly disruptions. Companies are re-evaluating their off-shoring programs, identifying locations more operationally and economically efficient.
While the global supply chain was still reeling from production shutdowns and port closures resulting from the COVID-19 pandemic, the Russia-Ukraine conflict presented a new source of disruption. Unfortunately, companies have over the years largely confined their attention to cybersecurity and to financial risk, as we see every day with climate change, as we saw with the pandemic, with Russia and Ukraine, and now China and Taiwan, it’s necessary to look far beyond just a narrow risk aperture, and into the area of geopolitical risk, and indeed, business and operations risks.
The vulnerabilities in the supply chain over the last couple of years have resulted in efforts to re-engineer supply chains and to re-shore certain activities. However, that further destabilizes the supply chain and requires continuous monitoring of potential deteriorations if a catastrophic supplier loss happens with no previous warnings. If companies do nearshore something for example from Russia or Ukraine into Eastern Europe, you see materials and real estate inflation, and wars on talent acquisition as everybody’s competing for the same talent, therefore wage inflation rates go off the chart. So ultimately, the location risk component is extremely important.
While many countries and companies have adapted to the immediate impact and established tactical alternative sources and services, the apparent longer-term impacts of this conflict require strategic planning. The energy shortages already being seen in Europe will only worsen during the winter months and may result in local political unrest and a reduction in manufacturing, further straining the supply chain.
Only a few years ago just-in-time manufacturing and supply chains were considered game-changers. The last few years, however, have taught us that supply disruption from weather events, a global pandemic, and geopolitical upheaval can only be managed by prediction and real-time agility and responsiveness. Disruptions in the supply chain have resulted in those businesses not being able to meet customer demand. Emerging markets may not be able to sustain their growth with the reduction in export revenue – manufacturers can’t export products out of the country and into the delivery chain. Also, one of the most critical areas for companies to address is the new, rapidly changing ESG (environmental, sustainability & governance) landscape which is creating confusion and forcing a redesign of many strategic programs. Companies can adapt to the evolving business environment by utilizing current, validated, easy-to-consume, and action-reliable ESG Risk Intelligence.
Through continuous, real-time risk monitoring across the supply chain, companies can uncover the earliest indicators of risk – whether another potential lockdown, health crisis, geopolitical unrest, sustainability matter, or more. Companies today, however, heavily rely on survey-based assessments for their risk management due diligence. These assessments, typically completed once a year, are often incomplete and outdated. They offer a single view of risk at a single point in time and do not support proactive risk mitigation strategies. The risk landscape is evolving so rapidly that the need for current, dynamic risk intelligence, that supports early warning capabilities is greater than ever.
A modern approach to supply chain risk management enables continuous, always-on monitoring for emerging risks and real-time notification of potential trouble. But it’s not enough to continuously monitor the traditional risks of only financial and cyber. Today’s supply chains are vulnerable to a much more diverse range of risks. Therefore, businesses need to cover a full spectrum of risks that include location factors such as geopolitical and environmental, and climate risks as well the supplier factors of operations, compliance, ESG, and Nth party risks – all of which have the potential to disrupt global supply chains.
In the world of risk management, we often found ourselves playing catch up when an incident occurs, despite seemingly endless planning, training, and practicing scenarios. Fortunately, we now have the knowledge and tools to use past incidents and a broad range of metrics and indicators to develop patterns, identify trigger points, and reasonably predict potential outcomes, both positive and negative. Looking forward, dynamic and current location and jurisdictional risk intelligence will play a much larger role in service provider selection.
John will be speaking at our upcoming TPRM: Cross Industry USA Congress at the Crown Plaza Atlanta Midtown
You may also be interested in…
Have you made your free account?