12 June 2014 | David Noble
Just mention the word ‘risk’ and you’re likely to conjure up a range of responses in any CEO’s mind and none of them particularly pleasant. That’s because organisations and economies around the world are now facing unprecedented levels of risk. CEOs in every sector must come to understand the level of unpredictability and damage risk can bring and its brutal consequences if unmanaged and unforeseen.
And the last few years have certainly seen some of these challenges in high relief. Any automotive company recalling vehicles because of defective parts, or any food manufacturer unwittingly using rogue suppliers can testify that the consequences of risk result in impacts on brand, reputation and long-term success. The answer naturally, is that good procurement skills and knowledge will build sufficient resilience into supply chains. But, anyone in our profession knows in reality this undertaking isn’t easy.
So, along with the skills to manage risk, one of the greatest assets any professional has at their fingertips to support the development of resilience is their access to data and their interpretation of it. To that end, CIPS in partnership with Dun & Bradstreet has just launched its first global risk index to support the existing body of data and as another weapon in the mitigation armoury.
The index is a response to the demand that supply chain directors, CPOs and indeed boards and CEOs, are being asked to pay more attention to what risk can mean to their business, to consumers, governments and global economies and how they’re all interconnected. Combine this data with good networks and relationships, the ability to respond quickly to review plans and move quickly towards change, and it’s a powerful combined force.
Our index has been developed using 20 years’ worth of data in the creation of its methodology so its results are built on a strong foundation. The first quarterly report highlights that supply chain risk has increased since the start of the economic crisis and was at its peak in 2013. Though we see a reduction this year it appears the risk landscape will remain challenging for some time yet with instability from Russia and the East.
But there’s always a flip side to any challenge. By foreseeing dangers, businesses can snap up any opportunities to remain competitive.
Our professionals are at the forefront in offering such insight and value to their organisations but must show responsibility too. Understanding the difference will be key this year and beyond.
Meeting the energy crisis with skill
Continuing the risk theme, I recently spotted a report by the Global Sustainability Institute stating that the UK has only five years’ worth of fossil fuels from its own shores remaining (see p53), making any threats to imported supplies a very serious issue indeed.
Not that we’re the only country under this cloud. Germany may have a massive 250 years’ worth of coal remaining, but less than a year of oil. With the added pressure to be as green as possible and reduce emissions, it’s a tricky situation for all.
Our work with the oil and gas sector in Aberdeen may offer a different story however. The North Sea offers more resources if investment in ways of getting to them are supported even though the costs of production are rising.
The UK Department of Energy and Climate Change has publicly stated that in 2030 most of our energy will still come from oil and gas.
So that’s a challenge for our profession – to maintain supply chains with impeccable skill and for CIPS to help those professionals in their task.