Businesses may be more concerned about the risks of outsourcing or off-shoring during these times of recession, but are they worried about the right things?
According to results from a recent business continuity management (BCM) survey undertaken by insurance broker Marsh, 70 per cent of respondents felt there are high levels of risk associated with outsourcing or off-shoring and 50 per cent of all respondents felt that such risks are not fully understood or actively managed in their organisation. Almost all respondents (94 per cent) were aware of the importance that logistics and storage play in their supply chains, but only 58 per cent were able to identify particular areas of risk.
Senior management are often tempted to view risk of disruption to global supply chains from the perspective of catastrophic events such as earthquakes, shipping disasters or terrorist attacks. This is highlighted in the report by the finding that 65 per cent of businesses are concerned that their supply chains may be affected by terrorism overseas. But the greater risks facing global supply chains are those brought about through increased complexity around a supplier’s compliance and commitment to: Health and Safety regulations, legal and statutory issues, Corporate Social Responsibility (CSR) policies, environmental and quality targets, data security procedures, as well as the ability to supply goods and services to required levels of performance, and in these hard economic times, the financial strength necessary to stay in business.
Corporate reputation and brand values are jealously protected by organisations these days, as a supplier’s behaviour on one side of the globe can have a profound influence on how a company’s image or brand is perceived worldwide. The only way companies can reduce their exposure to the risks presented by supplier failure on these issues is to gain a greater insight into their suppliers. And that means evaluating and monitoring suppliers carefully and on a regular basis.
Only companies that manage risk successfully will continue to reap the benefits of low-cost country sourcing.