Manage risk to secure safer supply - a survey by PA Consulting Group

Preliminary findings are:

Few firms have the policies, skills or tools to manage supply risk - those organisations exposed to a very high probability and impact of risk have the most developed risk management operating models and employ the most sophisticated mitigation strategies. However, few organisations have a clear policy or are deploying the skills and tools for effectively managing supply risk.

Most firms are vulnerable as only a few of them have adopted best practices to mitigate supply risk - the supply risks that these organisations are exposed to can usefully be categorised by their potential impact on cost, quality, service, innovation and reputation. Organisations’ exposure to these risks is increasing due to economic instability, heightened consumer awareness, globalisation of supply and acceleration of technological change. While supply chain risk management best practices have been identified, few organisations fully adopt these, leaving many exposed to risks which are not effectively mitigated.

Consumer-facing businesses face the highest level of supply risk - the organisations with the highest levels of underlying risk tend to be those with most consumer exposure such as FMCG, pharmaceutical and healthcare businesses.

Heavy engineering industries face the lowest level of supply risk but are vulnerable as they remain unprotected - defence, aerospace and engineering companies tend to have moderate underlying risk but remain exposed due to underdeveloped risk management operating models and consequent lower levels of risk mitigation.