What it Means to Take Risk Seriously

This morning, I'd like to welcome back a regular guest columnist to Spend Matters. Brian Sommer is a Senior Fellow at Azul Partners, founder of Tech Ventive, and is author of the blog Services Safari.

Earlier in the month, I saw an interesting book review in Logistics Management. The review concerned Coast Guard Commander Stephen Flynn and his newest book: "The Edge of Disaster: Rebuilding a Resilient Nation". One particularly jarring comment was "There's a distinct possibility that your supply chain will be the conduit for the next terrorist attack -- and you're utterly unprepared to respond."

Flynn argues that resiliency must be something this country and shippers must develop into a core competency. However, the advice should also be heeded by those firms who rely, in ever greater amounts, on offshore sources of products. Supply chain risks are growing in number and magnitude. A business-as-usual posture is not an option. Even though Southwest Airlines recently had a write-down from hedging activities, we also know that their very willingness to hedge in the first place saved them from the industry-standard bankruptcy route that almost every other carrier directed themselves into by pursuing business-as-usual strategies.

Southwest didn't ignore risks. They didn't follow every other carrier's lead, and instead independently assessed their situation and placed some smart bets. However, many of Southwest's competitors are reacting to cost issues and poor planning. Sadly, these firms are spending more time in front of bankruptcy judges, creditor groups and Wall Street M&A firms that are looking to merge or break apart these firms. The lesson: proactively manage your supply chain risks or be prepared to have others do it for your company.

Brian Sommer authors the blog: Services Safari

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