Companies failing to act on supply chain risks

16 August 2009

17 August 2009 | Jake Kanter

More than 90 per cent of firms admit having "inherent risks" in their supply chain, but less than half consider them a priority for the year ahead.

Furthermore, almost a quarter have not heard of supply chain risk management or are not very familiar with it.

Of the 100 companies quizzed by risk adviser Aon and consultancy State of Flux, 91 per cent flagged up concerns over supply chain risks, but 58 per cent said the problems are not high on their agenda or they are continuing with "business as usual".

The majority of companies considered supplier financial failure as the most significant risk, while a "physical incident" such as a natural disaster impacting a vendor's operation was also a concern.

Most companies - 73 per cent - said they were reviewing contracts to mitigate risks. Communicating with suppliers and training programmes for internal staff were also popular.

Some 43 per cent of the firms said risk management influenced the way they designed their supply chain. But only 5 per cent said procurement, supply chain and risk management teams collaborated to mitigate problems.

Despite the findings, Grant Foster, head of enterprise risk management at Aon, which has conducted this same study in the past, believes purchasing is now more proactive in helping to manage supply chain risks. "The good news is that the issue of supply chain risks has been taken on board by procurement and embedded in their performance management and audit processes," he said.

SMaug2009

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