Global supply chains increase complexity of supplier risk analysis

Gurjit Degun
26 November 2013

Almost seven out of 10 business leaders believe supplier risk analysis will become more complex as they expand into new global markets.

That’s according to research by the Economist Intelligence Unit’s report Strategies for managing customer and supplier risks, sponsored by Dun & Bradstreet.

Two-thirds of the 395 respondents said adverse events associated with suppliers are becoming more frequent and severe.

Half (49 per cent) of those surveyed said “supplier risks are becoming more challenging because their supply chain is getting more complex”, and 36 per cent agreed that an increase in outsourcing essential inputs is creating challenges in supplier risks.

More than half (55 per cent) of those questioned said they collaborate with suppliers to improve performance in identifying and assessing supplier risks. Fifty-three per cent of respondents added that they use personal judgement.

When asked which two strategies organisations rely on to control supplier risks, 38 per cent said they heavily monitor relationships with high-risk suppliers, 37 per cent use contract language that controls risk, 35 per cent limit the scope or scale of business with high-risk suppliers, and 30 per cent have a blacklist of unacceptable suppliers.

The study also found companies that successfully manage risk use a variety of tools to manage specific threats.

“Many organisations represented in the survey are on the verge of implementing more advanced analytics. The majority say that they are using some analytical tools now to navigate through risk data and that they recognise the need for more sophisticated tools to obtain actionable or predictive analytics,” the report added.

The survey found 60 per cent of executives say they want to extract greater business value from risk data but are uncertain about how advanced analytics can help.

The report also encouraged companies to measure risk management as only about half of respondents said their company tracks the outcomes of their mitigation efforts. The survey found 85 per cent of those who track outcomes are successful, compared with 51 per cent of those that do not.

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