In times of low risk, risk rises in priority.


There haven’t been any big risk stories in the press in recent months. My risk sensors – procurement analyst antennae honed to detect the hot air from risk warnings – have been quiet as late.


There have been few earthquakes, typhoons, meteorite strikes or biblical plagues that have blighted the global supply chain. The business press has looked to other topics to fill their columns. Concerns over financial markets (rupee devaluations, quantitative easing, for instance) dominate the journalist’s agenda. The physical economy has proved relatively stable in contrast.


That is, of course, until the next crisis. At which point, a thousand writers on a thousand iPads will tap out another wave of apocalyptic prose. Even the hardest-nosed of procurement professional will be carried away with the fuss. We find in our research that, time and again, risk priorities reflect current headlines.


The conclusion that essentially businesspeople are not best at managing risk Their main failure: being human.


Given this knowledge, organisations should seek to increase the use of processes and systems to replace some of the ‘insight’ of ‘experts’ within the field.


We have recently published a guide to some of the approaches that can be taken to managing risk in the supply chain. In the main, we take the view that risk (and specific incidents which disrupt operations) cannot be anticipated, so the main task for procurement is to build a resilient supply chain capable of withstanding a broad range of events.


Essentially, this relates to the basics of supply chain management, focusing on price, quality and delivery. Building in processes which can address threats on this basis will reduce overall exposure – not developing complex socio-economic models which can forecast the next Arab Spring.


As such, when we are enjoying a time of relatively low risk (by which I mean, less press coverage) procurement should review and invest in their risk management processes. When there is less press oversight or management interest, decisions can be made on an analytical basis and not respond to the unduly emotional or stressed environment that may engulf an organisation during a crisis.


Non-members can view an extract from our SRM Strategy Guide here.

Jonathan Webb
Posted by Jonathan Webb

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