New Risk Management Priorities for Protecting the Supply Chain
February 9, 2012
While most enterprises have risk-management protocols that can address localized disruptions, recent high-profile events highlight how threats beyond an individual organization's control can have consequences that cannot be mitigated by the organization alone.
A new report from the World Economic Forum (WEF), produced in collaboration with Accenture, highlights the urgent need to review risk-management practices to keep pace with rapidly changing contingencies facing the supply chain and transport sector. The report is based on input from executives in automotive, aviation and logistics industries, as well as an interview series and survey involving industry, academic and government experts.
Approximately 93 percent of respondents indicate that supply chain and transport risk management has become a greater priority in their organization over the past five years.
According to the surveyed experts' assessments, the top management priorities today are:
- Trusted networks across business and government;
- Effective risk legislation and incentivization;
- Improved quantification metrics;
- Appropriate data and information sharing; and
- Enhanced scenario planning.
Most major organizations have some form of enterprise risk-management approach that addresses local and internal operational risks. In a 2011 survey of almost 400 executives across 10 major industries, Accenture found that more than 80 percent of respondents had an enterprise risk-management program in place, or plan to implement one within the next two years.
Although companies are placing more emphasis on risk preparedness, threats beyond an individual organization's control can have consequences that cannot be mitigated by the organization alone.
"[T]he interconnected nature of global supply chain and transport networks means modern businesses are often reliant on thousands of independent suppliers and partners located in many countries," the WEF report states. "Consequently, they both affect and are affected by risks at various stages, from the sourcing of raw materials to the destinations of goods and services, and these risks are not always within the confines of the company's control."
According to the report, systematic supply chain and transport risk should be more effectively managed through multi-stakeholder action and collaboration. The key players are the supply chain and transport industry itself, its customers and government policymakers.
Emphasizing the need for significant interaction between businesses and governments to drive improvement in various risk-management methods, the report provides the following recommendations for government and business:
- Improve international and inter-agency compatibility of resilience standards and programs;
- Explicitly assess supply chain and transport risks as part of procurement, management and governance processes;
- Develop trusted networks of suppliers, customers, competitors and government focused on risk management;
- Improve network visibility through two-way information sharing and collaborative development of standardized risk assessment and quantification tools; and
- Improve pre- and post-event communication on systematic disruptions and balance security and facilitation to bring a more balanced public- and private-sector discussion.
The WEF/Accenture study was published on the same day that the Obama administration launched the National Strategy for Global Supply Chain Security, an initiative aimed at strengthening the global supply chain to protect the American people and secure the country's economic prosperity. The new program would plan for worst-case scenarios, enabling the government and industries to respond quickly to disasters that could disrupt access to vital commodities. The National Strategy for Global Supply Chain Security outlines clear goals to promote the efficient and secure movement of goods and foster a resilient supply chain system.
"We must continue to strengthen global supply chains to ensure that they operate effectively in time of crisis; recover quickly from disruptions; and facilitate international trade and travel," Secretary of Homeland Security Janet Napolitano said in a statement.
New Models for Addressing Supply Chain and Transport Risks World Economic Forum and Accenture, Jan. 25, 2012
New Risk Management Practices Needed to Safeguard Transport and Supply Chain Networks... World Economic Forum, Jan. 25, 2012
2011 Global Risk Management Study Accenture, June 29, 2011
Secretary Napolitano Unveils National Strategy for Global Supply Chain Security
U.S. Department of Homeland Security, Jan. 25, 2012