Focusing on process to tackle supply chain risk could be detrimental

14 October 2014

Complex “extended” organisations with multi-tiered value chains, networks and numerous third party contracts require leadership and a focus on relationships and behaviour, rather than the process thinking typically associated with supply chain risk management, a report from the Institute of Risk Management has stated.

“More rules, regulations and contracts are never the full answer for complex problems and can actually be counterproductive,” according to the report, Extended Enterprise: managing risk in complex 21st century organisations.

“Enquiries into both the banking collapse and failures of safeguarding for children in care have both concluded that improvement does not come from more procedures and tighter compliance but from addressing leadership, cultural and behavioural issues,” the report stated.

“Good governance cannot be imposed through compliance with standards but needs to be constantly revised and improved. This involves balancing good processes with wise judgement in a constant renewal process [which is] built on valuing diversity, developing self awareness and regular benchmarking,” it added.

This means risk professionals who want to operate successfully need to develop the ability to deal with ambiguity, manage conflict, collaborative working and stakeholder engagement. Collaboration between sectors will also help reduce overall supply risks and promote the long-term health of the value chain in that sector.

“As well as supporting organisational performance, a better understanding of extended enterprise is also vital if we are to play our part in tackling wider problems including slavery, abuse, environmental damage and dangerous working conditions,” Richard Anderson, chairman of the Institute of Risk Management, said.

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