“Summer Time, and the Living Is (not so) Easy” … risk report 2020

We’re officially into August, which traditionally has been a month of fewer meetings, conferences and so on in the European workplace calendar - a chance to catch up on things, make plans, read more, and get ready for whatever the second half of the year throws at us. This year we thought we’d highlight some good reading that every procurement professional should have on their list to help get prepared for the next sudden turn of events.

riskmethods has just produced its ‘2020 Risk Report: The Year That Changed Everything.’

You may be aware that riskmethods is one of the firms that have been keeping us all to date over the past few months. It has produced daily updates on coronavirus and the impact on global supply chains, including a snapshot of risk level assessments, recent developments like labour shortages and affected industries, impacts on exports, plant closures, travel disruption, and what to expect next.

In this latest report it compares supply chain risk in 2019 with the new threats we’re experiencing this year, and uses its Risk Intelligence data to show how quickly risk management priorities can go up or down. In order to show the complexity of supply chain risk and demonstrate the need for a strategic, proactive, data-driven approach to supply chain risk management, the report highlights:

  • The top 10 supply chain threats of 2019 vs 2020
  • Which business risk categories rose and which fell
  • How supply chain risk evolved month by month in 2020

While most organisations are resuming work and even ramping up production, riskmethods reminds us that global supply chain issues remain. There are still capacity limitations, product shortages and a substantial decline in revenue and orders for many organisations. “The economic backdrop is also worrying,” it says “with many suppliers struggling financially. In fact, according to riskmethods data from May 2020, potential financial distress of suppliers was 2.75 times higher than at the beginning of the crisis, and accounted for more than half of all types of coronavirus-related risk.” It also reminds us that despite the severity of the pandemic, procurement and supply chain professionals cannot afford to lose sight of other risks and warning signs in the market.

So the report goes on to help us understand risks and risk indicators. It lists the top 10 risk indicators for 2019 vs 2020 from January to May that contributed to various business risks. By “risk indicators” it means factors or events that contribute to a certain type of business risk, which might be company ownership structure, key employee stability or business partner fines or penalties. Then it shows how the key indicators have changed position or priority with the effect of the coronavirus outbreak.

It also lists the percentage change in early warnings per risk category from January to May 2019 vs January to May 2020, and changes in specific risk categories, such as cyber security risk, labour practices and human rights risks, and staff dispute risks. It then breaks down risk development into a month-by-month scenario: for example, it says that in the first five months of 2020, enterprises received nearly as many warnings of suppliers’ force majeure claims as in all of 2019.

But probably the most valuable part of the report for procurement and supply practitioners is the section on “What’s next? Watching for aftershock effects on risk.”

It explains what riskmethods expects to see in the COVID-19 aftershock, and the areas to which it expects to see organisations giving priority, advocating that organisations put greater emphasis on diversifying suppliers and achieving end-to-end visibility for crisis recovery.

The report can be downloaded here, for free.

As you would expect the report focuses quite heavily on supplier financial risk as a key indicator, so you will also find a lot of value in a recent Spend Matters series of articles, ‘Making Sense of the Supply Risk Management Solution Landscape’ for practitioners. Analyst Pierre Mitchell presents a framework for supply risk management that not only is segmented to meet the objectives of supply-side professionals, but also integrates into the higher-level enterprise risk/GRC areas. Because the market is complex and busy, he introduces vendors of supply risk management and compares them in an effort to untangle the overlap in SaaS solutions, analytics-derived intelligence and risk scoring methodologies.

They can be found here:

Making Sense of the Supply Risk Management Solution Landscape (Part 1)

Comparing 4 Supply Chain Risk Management Vendors (Part 2)

A Look at 8 Supplier Management Providers (Part 3) and

Supplier Financial Risk Monitoring Services (Part 4)

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