Don’t Ignore Country Risk in the Supply Risk Equation

More and more frequently, we're seeing detailed articles
such as this in insurance publications focused on supplier and supply chain risk. This attention from the insurance side is a great complement to the coverage that procurement and supply analysts, publication sites and blogs continue to provide on the topic. Yet something that is just beginning to surface more often is country-specific supply risk factors. In the above-linked article, there are a few short paragraphs worthy of calling out.

Stephen Kay, US practice leader for Marsh's political risk and structured credit practice, is referenced saying, "companies often mistake a current, docile political environment for long-term stability." Specifically he observes, "If you go to a country with unstable regimes or immature legal environments, people get a perceptional bias ... they think if a country has been stable for, say, the last 10 years that that will continue indefinitely. That bias feeds into the short-term thinking.''

Moreover, companies are investing more focus on looking at where goods and services really come from. "The surprise comes when companies realize their suppliers are no longer operating in China ... That's where the contract operator claims to be, but in reality they're sourcing from Cambodia, Vietnam, Bangladesh ... they've extended their supply chain without the knowledge of those organizations that are running their supply chains."

Country risk -- and supply risk awareness involving extended supply chains in regions we don't track as closely as we should -- is a topic that we'll explore on Spend Matters and MetalMiner in more detail in the coming quarters. We hope to feature a regular series on the topic of country risk, leveraging D&B and related data, to provide a better picture of the specific risks companies face in markets across the globe. To get a sense of the information that we'll be examining (and you should as well), take a look at this sample country risk report on China from D&B. It's dated, but you'll get the idea and the importance of tracking these variables as a core component of supply risk.

- Jason Busch

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