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Manage Tomorrow's Surprises Today

Steven Minsky

Supply Chain Risk Management

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A survey conducted by APQC found that in the past two years, 75% of companies were hit by at least one major unexpected disruption to their supply chain, defined as an incident with the capability of preventing a business from fulfilling promises to its customers. And what's more worrisome? Many of the organizations surveyed are proposed advocates of Supply Chain Risk Management and Enterprise Risk Management (ERM).

How are organization with structured ERM programs falling victim to such widespread supply chain disruptions?

Mary Driscoll addresses that question in the Harvard Business Review's article, "Research: Why Companies Keep Getting Blind-Sided by Risk," and her suspicions look familiar. Driscoll finds that while leadership in these organizations expressed concern about risks to the supply chain (political turmoil, natural disasters, etc.), the message was lost in its translation to the front line employees responsible for implementing mitigations and controls:

"The findings also show that the people at the front lines of the business were hamstrung by a lack of visibility into risk. Nearly half said they lacked the resources needed to adequately assess business continuity programs at supplier sites. Many relied on the suppliers filling out perfunctory, unreliable checklists."

Driscoll argues that these organizations were impaired by a lack of risk transparency, inability to prioritize resources, and ineffective communications with remote suppliers. All of these problems are systemic to ERM programs that must account for supply chain risks, and the solution to these issues is a flexibly, sustainable ERM software solution.

To successfully mitigate supply chain risk, Risk Managers must be able to create transparency by mapping risks to the concerns of senior leadership. Additionally, while traditional IT installations are inefficient to install at remote suppliers, a Software-as-a-Service (SaaS) business models allows for infinite users, enabling engagement regardless of distance. And unreliable checklists? Replace those with standardized assessments built on practices proven to provide business value.

The challenges faced by Supply Chain Risk programs - engagement, transparency, and intelligent reporting - are not unlike the risks faced by entirely centralized ERM programs, but they do require an approach capable of spanning a global enterprise.

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Reprinted with permission.  From HBR blog, "Research: Why Companies Keep Getting Blind-Sided by Risk" by Mary Driscoll,www.hbr.org, July 2013.
Copyright (c) 2013 by Harvard Business Publishing; all rights reserved.
 

3 Comments

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Risk Management, not just in a project or on a project basis, needs to be incorporated into the ongoing process of business at all levels, departments and functions... Senior Mgmt too often gives far too little attention to the actual consequences of errors, omission and incorrect information (communication hiccups). The actual cost, not only in money but in lost efficiencies, redirection of resources and damage to reputation and goodwill are not fully considered until... 'the incident happens'!
It is our view that ongoing employee development is one of the strongest steps in the solution, in particular when attached to thorough Risk Management assessment.
The 1st order of business is to make a profit and to do so requires seamless efficiency. This comes with the investment in systems yes, but more importantly in people. As technology levels the competitive playing field, it is people and their performance that become the differentiators.

If 75% of companies are getting hit by unexpected risks I wonder what we're missing. Obviously you can't plan for something like a major storm, but there are a lot of risks when it comes to your suppliers that you can prepare for. If your employees feel like they are constantly playing catchup it's hard to mitigate risk.

I wish I had the ability to write as well as you do! Such a nice blog i have read in long time.

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In this blog, risk expert Steven Minsky highlights the differences between traditional risk management and true enterprise risk management, which is about helping things happen rather than preventing them from happening. Manage Tomorrow's Surprises Today is designed to help you think about risk in new ways and learn how to benefit practically from this rapidly evolving field.

Steven Minsky

Steven is the CEO of LogicManager, Inc. the leading provider of ERM software solutions. Steven is the architect of the RIMS Risk Maturity Model for ERM, author of the RIMS State of ERM Report among many other papers, and a RIMS Fellow (RF) instructor on ERM. Steven has conducted ERM and RIMS Risk Maturity Model training for hundreds of organizations around the globe. Steven is a patent author of risk and process management technology and holds MBA and MA degrees from the University of Pennsylvania’s Wharton School of Business and The Joseph H. Lauder Institute of International Management. You can reach Steven at steven.minsky@logicmanager.com.

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