UK failure on risk planning puts supply chains in danger

8 May 2002
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09 May 2002 | Robin Parker

Crises such as the fuel protests and the foot and mouth outbreak caused chaos at more than one in four UK organisations in the past five years, according to a wide-ranging report.

But nearly a third have no business continuity plan to keep running if disasters strike, the Chartered Management Institute found.

The institute also discovered that less than 10 per cent of firms that outsource facilities or services insist that suppliers plan for risks when drawing up contracts.

In the survey of 674 managers in the public and private sectors, the institute argues that failure to analyse such risks in advance makes supply chains particularly vulnerable.

Its findings, outlined in Business Continuity and Supply Chain Management, have extra importance in the wake of the 1 per cent rise in national insurance contributions announced in last month's budget. Outsourcing is expected to increase as organisations bid to escape the higher labour costs the rise will bring.

Less than 20 per cent of those polled analysed in detail their suppliers' potential to disrupt business, which the institute called "a disturbing lack of proper analysis of suppliers".

John Sharp, chief executive of the Business Continuity Institute, which supported the report, was alarmed at the lack of preventative measures built into outsourcing contracts.

"Given the high level of outsourcing of key processes, this is of major concern," he said.

"Businesses need to test the 'what if' factors - other service-level agreements are not proven until you actually have a failure."

Graham Sweet, visiting fellow at Cranfield School of Management, said risk management was a vital part of the information sharing in supply chains where many services were outsourced.

"All supply chain partners need to be working on a single version of the truth," said Sweet.

SMmay2002

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