Ignoring Supply Chain Risk

 
 

Despite almost universal awareness of the potentially dire consequences of supply chain disruptions, few supply chain executives are actually doing anything to manage the risk. According to a survey conducted by the Global Supply Chain Institute (GSCI) at the University of Tennessee and sponsored by UPS Capital, 90% of firms do not quantify risk when outsourcing production and none use outside expertise when assessing supply chain risk.

Although all supply chain executives surveyed acknowledged insurance as a highly effective risk mitigation tool, it was still not something they were involved with. And while 66% of companies have risk managers on staff, these individuals are usually in legal and compliance and do not focus on supply chain risk either.

“We were surprised by some of the findings regarding the lack of mitigation strategies,” said Dr. Paul Dittmann, GSCI executive director and the study’s author. “Any business that does not have some basic form of risk mitigation plan in place is simply gambling with its existence.”

 
Morgan O'Rourke

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About the Author

Morgan O’Rourke is editor in chief of Risk Management and director of publications for the Risk & Insurance Management Society, Inc. (RIMS)

 
 

2 Comments

  • Morgan, thanks for the confirmation. I'm preparing a talk (and may do a text) on contractor risk management and will include traditional insurance, contracts, and control elements. I also plan to introduce supply chain elements, i.e. partnering with contractors to maximize customer benefits.

    I like you have also found little on use of risk control and risk financing techniques to help manage risks of supply chain contractors.

    While it sounds very logical perhaps risk management of the supply chain risk management is somewhat new. it appears the risk manager can play a key role if consulted.

    Can you suggest any risk managers who I might contact to test these thoughts?

    Thanks!

     
  • openupthedebate

    Perhaps those interested in high impact reputational risks such as safety (H&S, HSE) or ethics/sustainability such as labour force welbbeing/conditions, or conflict minerals management. Insurance is key to any risk strategy but we;re seeing increasingly companies trying to proactively think about risk in the supply chain and finding ways to increase their awareness of those risks to infer control before they actualise.

     
 

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