The globalization of business sourcing and outsourcing has raised the bar when it comes to supply chain risks. Nearly 75% of 110 risk managers surveyed by Marsh Inc. reported higher supply chain risk levels since 2005, while 71% reported increased costs as a result of unexpected disruptions during those years. Worse yet, not a single survey respondent judged their company “highly effective” at supply chain risk management, and just 35% said they were “moderately effective.”
Within a few short years, the survey indicates, risk managers' jobs have been redefined. Greater threats resulting from increased foreign sourcing, for example, is forcing them to take on business and operational risk, such as compliance in far-away countries where there is little local oversight. “They used to focus on insurable risks, but now they must measure uninsurable operational risks as well,” says Beth Enslow, senior vice president of Marsh's supply chain risk management practice and author of Marsh's new report: Stemming the Rising Tide of Supply Chain Risks.
And it's not just risk managers' whose jobs are being redefined; financial executives report they are donning yet another hat–taking on responsibility for establishing corporate-wide supply chain policies and practices. In conversations with financial vice presidents, CFOs and treasurers, Enslow says she has found many routinely placing supply chain concerns under the umbrella of enterprise risk management. “They recognize that if there is a supply chain disruption, it won't just delay deliveries and hurt income; they could wind up on the front page of the Wall Street Journal,” she says.
Executive influence gives risk managers the clout they need to form cross-functional teams of leaders from finance, legal, risk and operations (including procurement and logistics, as well as manufacturing when appropriate.) One survey participant, representing a data services company, said his firm has benefited from the team it set up more than two years ago. “This shared structure has created consistency and let us resolve issues quicker than in the past,” he said, asking to remain anonymous. “For instance, understanding how others on the team have solved supplier issues has helped a lot.”
Despite the proven value of such cross-functional teams, says Enslow, just 19% of participants at companies with more than $1 billion in revenues report having one in place. Yet, without them, risk managers have the difficult, if not impossible, job of navigating the organization to insure consistency in supply chain practices at the operational level, and to make sure the right questions are asked upfront,” says Enslow. “The winners will be those risk managers and their financial executives that get conversations going at the beginning of the planning, rather than as an afterthought.”
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
- Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
