Companies are struggling with risk analysis in strategic sourcing, according to a recent report from Aon Risk Solutions. The report found companies are overall less prepared for risk.
Some of the findings included:
- Among the top risks for companies were economic slowdown, regulatory changes, increasing competition and business interruption
- Political uncertainties entered the top 10 for the first time. Global companies may source from different countries, and social unrest can cause disruptions in the supply chain
- Aon reported that 2013 had more respondents than ever, which could be an indication that companies are growing more concerned with risk management
- Weather and natural disasters are predicted to enter the top 10 risks by 2016, meaning may companies may be adapting their procurement strategies in the next three years
"One possible explanation of the decline in risk readiness could be that the prolonged economic recovery has strained organizations's resources, thus hampering the abilities to mitigate many of these risks," said Stephen Cross, chairman of Aon Global Risk Consulting. "Our survey revealed that, despite diverse geographies, companies across the globe shared surprisingly similar views on the risks we are facing today - whether or not they feel prepared."
Organizations that understand risk management is not just part of the business but a means to improve the organization can drive their bottom line, according to Supply Chain Digest. Fifty percent of a company's value can come from outside suppliers, so procurement adaptability is important to the success of managing risks. Early risk identification can be a method for minimizing the impacts of changes to a supply chain. Supply Chain Digest notes many companies prioritize risks to identify which components of a supply chain have the potential to cause the biggest disruption and focus on taking action when necessary. As processes change, the ability to adapt is critical.