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SUPPLY CHAIN RISK
Digitalising the supply chain BY NICK WILDGOOSE
Making supply chains more resilient and environmentally sound requires building and implementing a robust and responsive digital infrastructure
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xtensive research by the analyst McKinsey suggests organisations’ supply chains will face disruptions lasting a month or longer every four years. In this same report, McKinsey Global Institute: Risk, resilience, and rebalancing in global value chains, August 2020, it calculated that organisations across a range of industry sectors can expect to lose almost 45 per cent of one year’s profits over the course of a decade, based on probabilities of existing patterns of current disruption events. In addition to these losses, there is also the potential further loss caused by reduced market share following a disruption. In Enterprise Risk
fact, organisations often do not understand their financial exposure to a particular supplier production facility or a logistical hub and have thus suffered unexpected major profit and cash flow impacts. COVID-19 has been a further reminder of the fact that most organisations depend on having a resilient supply chain to be able to serve their customers. In fact, some businesses now compete based on the strengths of their supply chains. It is therefore critical that organisations invest the appropriate amount of resources to ensure they have the right level of supply chain resilience. This focus on supply chain
resilience needs to be driven from the top of the organisation. It must recognise the significant overlap with supply chains and the need to address climate risk from a business performance perspective in terms of the joint requirement they must drive supply chain transparency. It also needs to ensure that the appropriate level of investment is available and that the initiative is driven forward on a cross-functional basis in accordance with an agreed overall business plan. In preparing for the future in a post COVID-19 world, organisations will need to restructure their supply chains, and in doing this it will be critical to consider risk appropriately. This is about not only pandemic risk but also the ongoing financial, 30
