Geographical Risk


RISK IDENTIFIED

 

Source of Influencers

Internal
Connections within your group of companies, or purchasing specifications generated internally, or decisions made at board level can all lead you to operate in certain countries, with higher associated risks than other countries.

External
Suppliers may choose to 'cluster' because of the proximity of raw materials, or geographic advantage e.g. a port.


 

Organisational Consequences

Operational
Restrictions on commodities or materials leading to loss of supply, climate-related problems or delays (occasionally with devastating effect), and difficulties in moving goods to or from a particular region, are all potential operational risks.

Financial
Operational challenges in distant regions are expensive to rectify from afar, especially if a quick solution is required.

Reputational
If publicly scrutinised, would your decision to buy from a particular region provide any reputational challenges? Could your involvement in a region be interpreted as exploitative?


 

Sustainability Consequences

Social
Difficult to monitor compliance with your policies; audits organised, and announced well in advance can be 'rigged'.

Environmental
Environmental challenges due to climatic conditions, e.g. areas prone to floods.


Risk and Resilience 

 

RECOMMENDATIONS

 

  • Encourage your key suppliers to participate in the CIPS Sustainability Index, which will help identify any potential risks in this area
  • Ensure you incorporate a geographical risk review into your supplier selection process where appropriate
  • Use detail from the CIPS Risk Index, powered by Dun and Bradstreet, to support your considerations
  • Provide training for your team in the risks and challenges associated with sourcing in a high risk geographic region at some point in your supply chain
  • Consider the consequences any quarter-on-quarter changes in risk may have with your current sourcing profile
  • Ensure you have developed an understanding of these and any other relevant climatic influences that allows you and your team to make informed judgements when sourcing internationally
  • Ensure you have a comprehensive view of all of your international sources of supply
  • Carefully consider the selected logistics approach to arrive at a solution that is robust, economical, timely and appropriate to the perceived climatic risk
  • Ensure you have contingency plans in place to build in resilience to your supply chain process
  • Develop sources of knowledge that provide the best awareness of potential climatic challenges in geographic areas that you currently and potentially source in
  • Ensure you have developed an understanding of these and any other relevant climatic influences that your suppliers may be affected by in the geographic areas where they source
  • Seek to understand what steps your affected suppliers have taken to build in resilience into their supply chain to mitigate adverse climatic influences, and build appropriate questions into your tender process to find this out
  • Ensure you have a clear understanding of your inventory approach in respect to operationally sensitive goods that are internationally sourced
  • Develop a regular review process of expected lead times
  • Continually monitor those items where inventory is intentionally low and operational sensitivity is high
  • Ensure you and your suppliers have an early warning process in place to help mitigate any potential future challenges caused by climatic variations
  • Have available expert knowledge sources to support your deliberations in this area
  • Consider developing areas of commodity/category expertise within your buying team
  • Provide appropriate training resources to support any ‘upskilling’ activity in respect to commodity management
  • When engaging with and in particular visiting international suppliers make a point of researching the business traditions and overall culture of the countries involved
  • Ensure you have access to appropriate sources of knowledge including UK foreign office advice, and advice from the country in questions own embassy.

 


 

FURTHER RESOURCES

 

CIPS Supply Chain Risk and Resillience Report

Supply Chain Risk and Resilience

Whilst there are numerous BSI and ISO standards developed for business continuity, risk management and organisational resilience there is no global benchmark that can be used to test and develop an organisation’s end-to-end supply chain resilience. The objective of this CIPS introduction along with the forthcoming good practice guidance and online tool is set to fill this gap. This will help procurement and supply management professionals support the survival of their organisations by identifying supply chain risks whilst protecting shareholders and the general public against the effects of disruption and malpractice.

Read the full report

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