Risk in 21st Century Supply Chains


Written by Phil on August 19, 2009 in Business Continuity, Risk Management, survey.

Nearly three-quarters (74%) of businesses are taking a hands on approach to managing supply chain risks, according to the latest Risk in 21st Century Supply Chains survey, the second report from global risk adviser Aon and strategic business partner State of Flux.

In 2008, Aon and State of Flux undertook research on supply chain risk that focused on identifying and contrasting the different practices that organisations adopt to manage their supply chain risks1. The 2008 findings showed distinct differences between the extents that supply chain risk management practices were embedded. The 2008 report put forward the concept of ‘leaders’ and outlined what the ‘leaders’ were doing that others were not and the challenges that others may be exposed to if they did not respond.

This 2009 research document focuses primarily on reporting the changing trends over the past year. Additionally, it presents six considerations that Aon and State of Flux believe should be reflected upon as part of an organisation’s approach to embedding supply chain risk management.

An overview of themes from the survey

  1. The risk of financial failure of suppliers has increased, perhaps unsurprisingly, given the recent economic turmoil. 75% of respondents report that they view supplier financial failure as a key risk area. Those respondents reporting actual business interruption incidents state that 7% relate to financial failure of suppliers.
  2. The importance of supply chain risk management as a priority for 2009 has increased significantly (up 15% to 42% in 2009) and accountability is being raised up the organisation to board and chief officer level.
  3. Organisations are embedding processes to address supply chain risks and taking a more hands-on and proactive approach. This includes communicating expectations to suppliers and using regular follow-up, supported by questionnaires and audits. Less reliance on passive strategies such as risk assessment and insurance is reported.
  4. This pressure is travelling up the supply chain with respondents reporting an increased scrutiny by customers (49% reporting some or significant increase).
  5. However, supply chain risk management is still relatively immature with only 15% of respondents reporting that they have a complete understanding of their suppliers’ supply chains and where they impact their operations and 42% reporting that they have no key performance indicators in place to monitor supply chain risk.

See Risk in 21st Century Supply Chains: A second survey by Aon Limited and State of Flux Limited.

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David Kaye and Julia Graham’s book A Risk Management Approach to Business Continuity: Aligning Business Continuity with Corporate Governance extensively addresses the relationship between business continuity and risk management, and supply chain implications in particular.

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