Following the various supply chain disruptions caused by the global Covid-19 pandemic, there have been national and public discussions about the merits of the repatriation of currently outsourced supply chains for essential goods – such as pharmaceuticals, for example. Ultimately, all the arguments on the subject and the option of supply chain repatriation as a strategy to guarantee greater national and economic security and independence – all the pros and cons – will need to be carefully assessed by experts and corporate executives. The modern world is way too complex and interconnected & there is no one-sized and universal solution neither for the country nor for any single business.
While pandemic and global supply chain disruptions may happen more frequently in the future, due to unique modern conditions, a successful company cannot wait till a disaster strikes to react to these risks but must proactively work to prevent, assess, control, mitigate and react to them through a comprehensive risk management program. This program should sound the alarm as early as possible and include a complete, effective and tested implementation readiness plan. In the extremely competitive and codependent world of today, anticipating risks and planning effective mitigation or remediation measures, may not just guarantee continued profit but oftentimes the survival of the company itself.
A risk management program must:
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Identify and Assess Risks – there are many and varied sources of risk for any modern company. Environmental catastrophes, pandemics and geopolitical unrest may endanger supply chains, but operational risks are only one amongst many. Today, a company’s brand and reputation may be permanently damaged because of a single negative review by a prominent social influencer or – in a divisive social environment such as ours – by a politically charged off-the-cuff comment made by an executive. Legal risks may arise due to an unwarranted lack of compliance to local labor laws or a disputed interpretation of an international contract. Also, as recurring security breaches and the recent international scrutiny of Facebook make clear, in a digital world, increased and existing risks to consumer privacy, the probability of unauthorized data mining as well as data theft increase the need for data security procedures and protocols. Global presence and supply chains add multiple dimensions to these risks as each country has different laws and regulations that govern each area of concern.
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Develop Risk Management Plans – Within the context of supply chain management, risk management programs must continuously collect, analyze, and monitor supplier data at all levels of the supply chain – ideally beyond the first and second tier suppliers. The integrity and transparency of the information is crucial for accurate risk assessment and mitigation plans. Risk profiles and probability analysis can be especially useful tools in this area. Ultimately – based on estimated impacts and costs to the company as well as risk tolerance levels – suitable risk management options can be chosen for each risk instance, such as risk transfer or risk control, for example.
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Monitor and Control Known Risks and Be on the Lookout for Emerging Risks – Procedures and policy must be established for risk monitoring and control once known and probable risks have been assessed and mitigation and remediation plans have been laid out. Scheduled bench marking and internal audits can be useful to monitor and control identified risks and discover new risks. Equally important are the establishment of detailed plans for implementation readiness and threat detection. Wherever and whenever possible, testing and validating business continuity plans would add an extra level of preparedness in the event a disruption does occur.
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September 2020 / Insights / By: Dr. Alessandra Bufano
