Supply Chain Risk Management: Key Strategies for CSCOs

Supply chain teams must constantly address risk, whether generated internally (e.g., workforce dynamics, business model shifts) or externally (e.g., macroeconomic disruption, environment and climate dynamics). Supply chain disruptions can put business performance at risk, cause reputational and financial damage, and threaten organizational viability.

To effectively mitigate supply chain risk, it is vital that chief supply chain officers (CSCOs) are aware of, and comfortable with, the level of risk exposure and the effectiveness of the controls in place for the risks that may impact the business. Without this knowledge, risk mitigation strategies will not be appropriately resourced and the risk of control failures increases.

Start by identifying risks. To obtain a consistent, holistic view of supply chain risks, be sure to examine not only the risks inside the supply chain function, but also external risks driven from customers, suppliers, regulators and NGOs. Additionally, organizational risk experts (e.g., corporate enterprise risk teams, internal audit) can provide risk appetite and risk reporting insights.

Next, assess the materiality of risks and document the controls that can minimize the likelihood of a risk occurring or help to respond to a risk after an event. For example, to mitigate supplier failure risk, conduct due diligence and supplier audits, and to mitigate cyber risk, develop vulnerability analysis and continuity plans.