Share data to mitigate against disaster

30 June 2011

30 June 2011 | Adam Leach

Organisations’ failure to share information with each other is limiting their ability to protect themselves from supply chain risks, such as pandemics, cyber attacks and further economic crises.

A report by the Organisation for Economic Co-operation and Development (OECD) has found supply chains will become more vulnerable to the impact of disasters around the world due to globalisation and a reluctance by organisations to openly share information.

The OECD, which presented the findings of two years research in its Future Global Shocks report this week, said: “The infrastructure for real-time data gathering and surveillance is weak for certain important hazards, and the sophistication of maps and models has surpassed the willingness to share some types of information.”

The report recommends organisations “step-up efforts to acquire and share data and a variety of simulation models to better anticipate and assess potential shocks”.

“Once a disaster strikes it is too late to create effective plans to cover the fallout for production, employees, reputation, supply chains or service disruption,” said the study. “Contingency plans for a broad range of adverse event scenarios must be in place, and they must build in flexibility to account for unknowns that can generate extreme events.”

The OECD suggests organisations would better protect their supply chain in the future by learning from the impact of previous disasters or disruptions.

Companies were urged by the report to increase the level of resources allocated to surveillance and monitoring of threats and early warning systems. It also stressed the importance of improving international co-operation to promote diversity in critical systems and enhance multi-stakeholder partnerships, information sharing, capacity building, stress tests and drills.

To lessen the impact of volatile commodity prices, the OECD said long term purchase arrangements that use a combination of fixed and indexed prices would help buyers acquire supplies at a stable cost.

To effectively manage supply chain threats, the report said companies must establish regular communication across departments ranging from procurement to finance to ensure commodity price risk management practices fit with corporate objectives.

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