1. Poor supplier performance. This is the most fundamental risk, and companies should prioritize it over other risks. A supplier's financial health is a reliable predictor of their performance, but other factors should be considered when making assessments.
2. Demand planning complexity. During the pandemic demand patterns changed as people were confined to their homes. Planning for pent-up demand was easier when companies operated on a just-in-time basis. Now companies need to buy more than they need immediately, but may not know exactly how much more.
3. Global labor shortage. Increased competition for skilled labor means that companies might not have the resources to build a product or deliver a service in time, or might struggle to find the skills needed to effectively assess, monitor, and mitigate supplier risk.
4. Rising inflation. High inflation creates unpredictable price increases, making it more difficult to plan and manage cashflows effectively. It also causes pricing negotiations with suppliers to take more time.
5. A volatile global economy. Post-pandemic economic uncertainty has led many to fear a global recession. Companies used to increase inventories to ensure steady production, but if the market contracts, companies might have unsold inventories at the peak of production cycles.
6. Complex sanctions and regulations. Even before 2022, three new sanctions were imposed every day. Keeping up with sanctions is challenging – firms need to know suppliers’ ultimate beneficial owners, directors, and shareholders to comply and to prevent bad actors from undermining their supply chain.
7. Geopolitical risk. Global political events like the Russian invasion of Ukraine and China’s zero-Covid policy have wreaked havoc on supply chains. Firms need both onshore and offshore alternative suppliers to ensure they have options in case of disruption.
8. Reputational risk. This can result from deficiencies in corporate governance, environmental or social responsibility. Responsible sourcing has become important as ESG pressures have grown.
9. Natural disasters and climate risk. Supply chains are vulnerable to property damage and business interruption due to natural disasters. Firms need to quantify the financial and operational impact in real time, and assess site-specific risks.
10. Cyber risk. The increased threat of cyberattacks has made paramount companies’ understanding of their own cybersecurity and that of companies they work with. Anyone with access to the company’s network or systems can be a risk.
Find out more about our supplier risk solutions.
2. Demand planning complexity. During the pandemic demand patterns changed as people were confined to their homes. Planning for pent-up demand was easier when companies operated on a just-in-time basis. Now companies need to buy more than they need immediately, but may not know exactly how much more.
3. Global labor shortage. Increased competition for skilled labor means that companies might not have the resources to build a product or deliver a service in time, or might struggle to find the skills needed to effectively assess, monitor, and mitigate supplier risk.
4. Rising inflation. High inflation creates unpredictable price increases, making it more difficult to plan and manage cashflows effectively. It also causes pricing negotiations with suppliers to take more time.
5. A volatile global economy. Post-pandemic economic uncertainty has led many to fear a global recession. Companies used to increase inventories to ensure steady production, but if the market contracts, companies might have unsold inventories at the peak of production cycles.
6. Complex sanctions and regulations. Even before 2022, three new sanctions were imposed every day. Keeping up with sanctions is challenging – firms need to know suppliers’ ultimate beneficial owners, directors, and shareholders to comply and to prevent bad actors from undermining their supply chain.
7. Geopolitical risk. Global political events like the Russian invasion of Ukraine and China’s zero-Covid policy have wreaked havoc on supply chains. Firms need both onshore and offshore alternative suppliers to ensure they have options in case of disruption.
8. Reputational risk. This can result from deficiencies in corporate governance, environmental or social responsibility. Responsible sourcing has become important as ESG pressures have grown.
9. Natural disasters and climate risk. Supply chains are vulnerable to property damage and business interruption due to natural disasters. Firms need to quantify the financial and operational impact in real time, and assess site-specific risks.
10. Cyber risk. The increased threat of cyberattacks has made paramount companies’ understanding of their own cybersecurity and that of companies they work with. Anyone with access to the company’s network or systems can be a risk.
Find out more about our supplier risk solutions.
