Here at Spend Matters, the topic of risk is ubiquitous. In the supply chain and procurement industry, it has to be: we are the people who are in charge of things running smoothly, be it making sure someone rescued at sea has a blanket, water, and food or that the new iPad makes it into the hands of an eager consumer. We scour data and put systems in place based on every risk factor that we have the time and resources to conceive. Which unfortunately is not always enough.
This is why I was extremely pleased to see this article in The Atlantic: Why Japan Was Ready. After all, things could have been much, much worse. Think about this:
"The international response over the past three days, effective though it has been, is dwarfed in comparison to Japan's efforts in the 15 years leading up to last week's earthquake. Building codes as strict as they are expensive, emergency drills and education for as many of Japan's 127 million citizens as possible, and a vast network of response centers and workers ready to spring into action in a few minutes notice -- which is all the time one really has to respond to a disaster such as this -- all contributed to making Japan, according to the New York Times, 'the best-prepared country in the world for the twin disasters of earthquake and tsunami.' In cities, buildings are fortified with elaborate systems of hydraulic cylinders; in coastal towns, many homes are networked with fire detector-like devices that sound an alarm in case of an earthquake. Despite the damage, 145 of Japan's 170 emergency response hospitals are still online, as are 2,050 evacuation centers."
Last week I spoke with Paul Martyn, VP of Bravo Solution, on the very topic of supply risk in terms of natural disasters (before the tragedy, mind you). Weather, earthquakes, tsunamis, and the like are an understood form of risk, he told me. Obviously, people living on the fault lines know that disaster can strike at any time, and they have a decision to make: how much risk should be planned for, overall? Companies need to decide what their threshold is, and decide what risk management techniques they're willing to invest in, be it insurance, arrangements for alternate suppliers, hedging, etc. -- and these decisions need to be made at the board level, and work their way down.
While the disaster in Japan will likely have lasting effects on our supply chains and the broader economy, we need to stop and think for a moment about how many lives were saved and how many businesses are able to soldier on just days after the event due to proper planning. The Atlantic article continues, "Japan drew heavily upon two resources it has in abundance: money and good governance. From the soldiers trained as health workers, to the civilian hospitals equipped for instant conversion into emergency response centers, to the elementary schools that double as drilling yards, it's difficult to find an aspect of Japanese public life that the state does not exploit to better prepare Japan for earthquakes and tsunamis."
For Spend Matters readers, especially those who specialize in this type of risk planning and mitigation: How do you think the Japanese earthquake/tsunami will effect future actions in the US and abroad? Germany has shut down their nuclear plants and Seattle might be closing one of their main highway thoroughfares, both in response to the disaster. Are these actions necessary? And what alternative/additional steps need to taken at this time? Comment below, I'm curious to hear your thoughts.
- Sheena Moore