Half of risk management programmes are not effective

New research suggests that risk management programmes are not proving as successful as they should be.

The point of risk management is to mitigate against problems in the supply chain, or those affecting cash flow. Given the uncertain global economy and the number of firms facing bankruptcy, it has never been more important to have an effective risk management strategy.

However, new research by Deloitte has found that not only have supply chain disruptions become more common, but CEOs do not hold much confidence in their risk management programmes.

Of the 600 executives polled, 53 per cent said that supply chain disruptions have become more costly to their organisation in the last three years.

But still, only two-thirds had a supply chain risk management programme in place and 45 per cent said that they were only somewhat, or not at all, effective.

“Supply chains are increasingly complex, and their interlinked, global nature makes them vulnerable to a range of risks,” explained Kelly Marchese, principal, Deloitte Consulting.

“This increased complexity, coupled with a greater frequency of disruptive events such as geopolitical events and natural disasters, presents a precarious situation for companies without solid risk management programs in place.”

However, more CEOs think that managing risk in the supply chain will need to become a more strategic issue.

Indeed, 71 per cent of executives said that supply chain risk is becoming more important to decision making within their company.

The Deloitte research also found that CEOs are concerned about the risks to their extended value chain from outside suppliers, distributors and customers.

Given how thinly stretched most companies’ resources are in the current climate, it is unsurprising that disturbances are having more of an impact than they were several years ago, and in some cases bringing a halt to production.

To reduce risk, the focus needs to be on supplier collaboration and flexibility.

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