5 Global Supply Chain Risks Threatening Your Business

The Resilient Enterprise | The riskmethods Blog
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March 12, 2019

Our artificial intelligence engine combs millions of data sources to identify global supply chain risks that have the potential to disrupt your procurement functions and your business. We took a look at five of them.

by Clark Herrin

If you’ve read anything from riskmethods, you know that we’re always beating the drum about the importance of supply chain risk management. And it’s for a good reason: Because we know that a lot of companies think they’re managing supply chain risk when, in fact…they’re barely managing supply chain risk, or not managing supply chain risk at all.

 

The problem is simple: There’s an enormous amount of different types of events that could result in disruptions in your supplier network. And if you’re relying on basic financial indicators alone, you’re simply not getting the full picture.

Our Risk Intelligence experts are the data nerds around here, and they took a look at the alerts we sent out in 2018 to warn our customers about potential supply chain and supplier disruptions. Here’s what we found the top 5 most common risks to be.

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#1: Company Viability

If one of your suppliers goes down, it has the potential to disrupt your entire business. A supplier shutdown is a big deal, and is of course something that you should be monitoring. The real key to managing this risk effectively, though, isn’t about being aware of it when it happens—it’s about getting the warning signs before it happens (also: making sure you can ask them about these warning signs when they happen). If you think it’s impossible to predict this kind of thing, you’re just not paying close enough attention. The thing you have to realize is: It's not just about standard financial ratings. By getting alerts about topics such as slow growth or poor revenue outlook, major ownership structure changes or major product recalls, you can be aware of your risky suppliers before they become actual threats to your business.

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#2: Natural Disasters

The number of natural disasters is increasing. And as the globalization of supply chains also becomes more widespread, this makes them even more of a threat to businesses everywhere. In their 2018 Supply Chain Resiliency Report, the Business Continuity Institute cites weather incidents as in the top 3 concerns for the companies surveyed. You can’t stop natural disasters—but if you’re monitoring the regions where you have key suppliers or core supply paths, you can make sure you take fast action (or preventive action!) to mitigate their effects on your procurement functions and your business.

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#3: Reputational and Compliance Risk

If you’ve ever seen a brand in the news because they were working with a company that got charged with a corporate sociality responsibility or compliance violation, you know that you don’t want that to be you. Are you aware of potential reputational and compliance risks in your supply chain or procurement processes? This was the third-most common alert we sent out in 2018. Risk events ranged from FDA warning letters to human rights violations. But if any of your business partners or suppliers are guilty of these kinds of practices, you’re going to want to make sure you know about it so that you can take fast action.

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#4: Man-Made Risk (Fires, Explosions)

Although they’ve often ranked as the #1 top risk concern according to surveys like the Allianz Risk Barometer Report, man-made risk events come 4th on the list in terms of common risks in our customer network. This type of risk includes not only fires and explosions, but any other kind of non-natural disaster that might shut down a business partner site or location (for example, a power outage, evacuation due to a bomb, etc.). You can't predict a fire or explosion, that's for sure...but that doesn't mean you can't be prepared. Does your procurement department have action plans in place for when a fire or explosion might disrupt your business?

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#5: Strikes

If industrial disputes and strikes aren't on your radar as a very real potential for business disruption, it's time they were. Just as easily as a hurricane or a fire can shut down a major port or plant, a strike can do the same. It's essential for your business that you know when a strike might cause a disruption in your supply chain, so that you can take the necessary actions to address it; for example, by rerouting shipments. 

Any one of these five risks can take out your business—but it doesn't have to be that way. Whether it's an issue with company viability, a natural disaster, brand bad behavior from one of your business partners or an explosion, it's possible to remain on top of it. In many cases, you can suspect that it's going to happen. In some cases, you can know that it's going to happen. In all cases, you can be prepared for it to happen. 

Clark-Herrin

Clark Herrin

Risk Intelligence Data Specialist

Clark is a Risk Intelligence data specialist at riskmethods. Got questions about how to stop supply chain risk from threatening your business? Drop us a line at om@riskmethods.net.

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