Firms Eye Global Supply Chain Risk Exposures
May 24, 2021
Smart Cube has reported unprecedented demand from companies seeking to better
understand their global supply chain risk exposures in the last 12 months.
Compared to 2019, the company saw a 167% increase in supplier risk-related
inquiries in 2020. And so far, 2021 has seen a continued upsurge in demand for
“The pandemic made ‘supply chain’ a household term,” said Omer Abdullah, MD and
Co-Founder of The Smart Cube. “Never before have businesses and consumers alike
suffered so acutely at the hands of a severely disrupted global supply chain. As
a result, businesses have been given an urgent wake up call to gain greater
visibility into the risks associated with a globalised supplier base. However,
as customers tell us, it’s not just the pandemic driving their inquiries.”
The global pandemic has illuminated many critical issues within the supply
chain, forcing companies to rethink how they evaluate their end-to-end supply
chain and all of the suppliers they ultimately rely on. It’s no longer enough to
evaluate first tier suppliers from a risk perspective. Companies must review the
entire supply chain and understand risk associated with their end-to-end
supplier network, including second, third, and fourth-tier suppliers, as well as
types of risk going beyond purely financial stability such as operational,
compliance, strategic and geographic risks associated with suppliers.
Beyond pandemic-related disruption, The Smart Cube noted two other primary
considerations that are arising as companies look to set up, revise or reset
their risk management programs:
Procurement is increasingly working to digitise operations as data volumes
continue to grow, and to capitalise on untapped cost savings and risk management
opportunities. A Deloitte study of global CPOs found that digital transformation
significantly grew in importance, increasing 20% since 2019. This year, 48% of
CPOs consider digital transformation a strong priority. From a risk management
perspective, this means companies want to access risk intelligence in
near-real-time, in a digital format.
Environmental, Social and Governance (ESG):
The United States Securities and Exchange Commission (SEC) has signaled the
potential for requiring enhanced ESG reporting by publicly listed companies.
This, combined with evolving consumer demands, concerns related to the
environment and global labor practices, and other factors, is driving businesses
and their procurement organizations to look outside of their four walls and
re-evaluate suppliers from an ESG perspective. Their own ethical standards — and
brand reputation — are on the line.
we’ve seen over the past year, and especially the last several months, is a
general awakening among CEOs and business leaders to the bottom line impact of
the supply chain,” said Abdullah. “During the pandemic, procurement has affirmed
its role as a key business value driver for organizations of all types, and
business leaders are responding accordingly.”
The Smart Cube expects the trend toward careful supply chain risk evaluation to
continue for the foreseeable future as companies work to re-evaluate their
supply chains to meet the new need associated with ongoing market volatility.
For more insights on supply chain risk visibility, register for a copy of Risk
and Your Supply Chain: Preparing for the Next Global Crisis here.
For businesses with a large supplier base and complex supply chains, managing
third-party supplier risk is a major challenge. The Smart Cube can help
proactively identify, monitor and mitigate third-party supplier risk to ensure
business continuity and meet compliance and sustainability goals.