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So Many things have been said about risk management.
I found the below article in the APICS Magazine. The intention is to show you that every company is at risk, at all times. The important thing is to constantly look outwards and inwards to collect, analyze and be aware of the potential risks around us.
Integrating Strategy and Risk ManagementBy Jonathan Thatcher, CSCP | N/A2013 |8 |8http://www.apics.org/
Do risks seem like external challenges to which you must react? Is strategy too high-level a concept to effectively address real-world risk? While most supply chain and operations management professionals know the right answers to these questions, too often we don't put those answers in action. In the August9 APICS Operations Management Now, “The Building Blocks of Risk Management,” APICS CEO Abe Eshkenazi, CSCP, CPA, CAE, wrote about how LEGO has learned to treat risk management as a critical aspect of its strategic efforts. Whereas the business traditionally had managed only the “usual suspects”__a fire, a legal matter, a network system crash__today, executives have become dedicated to truly comprehensive strategic risk management. Every business activity involves risk; there is no other way to achieve reward. Successfully walking that tightrope often is determined by asking
This is a fairly new domain for supply chain management, so many companies are allocating assets to address the challenge. LEGO, for example, created a new position: senior director of strategic risk management (SRM). The business also identified four key elements to its risk management strategy, which include integrating risk management in all aspects of the business, using Monte Carlo simulations to develop best- and worst-case outcomes, establishing a standard method of decision making, and creating a portfolio of possible scenarios. Interestingly, this approach revealed that LEGO was, in some cases, taking too few risks.SRM maturity offers powerful results if it is built into production, demand planning, budgeting, and partner relationships. We begin to see a more stable business environment__one in which, if even the worst-case scenario occurs, we know how to act rather than react. We come to view the risks that our organization is well-suited to handle as strategic competitive advantages. We start to remove uncertainty and, in its place, build stronger organization-wide performance, such as with sales and operations planning. Mark Frigo, director of the Center for Strategies, Execution, and Valuation at DePaul University, recently said: “If [enterprise risk management] (ERM) encompasses all areas of organizational exposure to risk, including strategic, why is SRM the new core competency? We believe SRM is a foundation for elevating the value of ERM and, for that matter, management in general.” In2011, APICS began developing extensive research in the areas of risk management and strategy designed for the supply chain and operations management practitioner. Ongoing research reveals that successful strategy means minimizing risk while delivering the right products and services to the right people at the right time, as called for by the business strategy. Furthermore, where business strategy and practitioner strategy remain independent, risk grows; effective companies thus integrate strategy and tactics, closing the gaps between senior management and supply chain and operations management professionals.
Jonathan Thatcher, CSCP, is director of research for APICS The Association for Operations Management and author of the APICS magazine “Ask APICS” department. He may be contacted at .
s executives find themselves being asked more and more questions about the risks facing their supply chains, many have decided it’s time to reexamine their assumptions and approaches. Below are thefive necessary answers of the questions heard most frequently regarding supply chain risk.
Q: Why is supply chain risk something companies and their executives should be worrying about now?
Supply chains today are more vulnerable than ever and the potential business impact has never been more multifaceted. Globalization is one reason for this, boosting supply chain complexity and magnifying the impact of disruptions by exponentially increasing the number of individuals, organizations and operations that can affect a product’s supply chain. Increased reliance on an extended value chain is another key factor. Today, it is virtually impossible to have a direct “line of sight” and drive accountability for risk across the entire supply chain. And social media adds an entirely new challenge by instantly shining a global spotlight on even the smallest, most isolated problems—giving companies no place to hide.
Q: Many companies have already spent a lot of time and money on supply chain improvements. What more can they do?
Ironically, traditional efficiency improvements have actually increased supply chain risk by focusing on cost reduction without an accompanying evaluation of the vulnerabilities it can expose. No matter how efficient a company’s operations might be, supply chain risk is a critical issue that needs to be addressed. The first step is to understand the most critical vulnerabilities. The second step is to identify who owns those vulnerabilities. In many cases, responsibility rests with more than one person or organization.
Q. For companies that have mostly used external suppliers, isn’t supply chain risk the suppliers’ responsibility?
According to The Ripple Effect, a recent survey conducted by Deloitte Consulting LLP,63% of executives see external suppliers as one of the biggest sources of today’s supply chain concerns. And when problems do arise, it’s the company—not suppliers—that will likely bear the brunt of the blame. What’s more, even having a diversified portfolio of suppliers is no guarantee. For example, when Japan was hit by a tsunami in2011, most companies thought their supply chains were safe because they had multiple suppliers as backups. As it turned out, many of those suppliers relied on the same secondary suppliers, causing the entire supply pyramid to collapse.
Q: How can supply chain risk be eliminated if the future can’t be predicted?
It can’t. Although some supply chain risks are readily identifiable and can be effectively mitigated with proper planning, others are impossible to predict and avoid. No company has the infinite resources necessary to address every possible risk. Your best bet is to create a “resilient” supply chain that can (1) react quickly enough to sidestep emerging problems or take advantage of market opportunities, (2) absorb a hard hit without shutting down completely and (3) bounce back quickly from even the biggest, most widespread disruptions.
Q: Resiliency sounds like a good idea. Where does one start?
There are four key pillars of supply chain resiliency. The first is visibility, having the ability to track and monitor supply chain events and patterns as they happen—or even before they happen. The second pillar is flexibility, that is, instilling an organizational mindset and expectation that the company can react to problems quickly and find workable solutions without significantly increasing operational costs. Collaboration is the third pillar and that means working with critical supply chain partners through symbiotic, trust-based relationships to avoid disruptions and achieve common goals. The fourth pillar is control. That requires defining the governance structure, policies and mechanisms for monitoring risk that help make it second nature to follow proper procedures and processes when the need inevitably arises.
It isn’t possible to identify and address every conceivable risk, so concentrate on the most critical vulnerabilities that are especially important to your business. Resiliency can be the difference between surviving and thriving in a world of increasingly complex supply chain risk. But it requires a new mindset and new capabilities across the entire supply chain. This kind of fundamental change doesn't happen overnight.
Identify, monitoring the way of risk and issues n Prepare handling plan for disruptions.
Agreed with Aysha Rasool Mirza
Aysha Rasool Mirza Business Development Executive at Raaziq Logistics
Suivie
Understanding the nature of risk is all well and good, but if that is
as far as it goes, then organizations remain at risk. What good are
a series of attractive, bound reports if there is nothing to act on?
You need an action plan to see the task through. This is true even
when your organization believes it cannot address risks outside of
the immediate universe of a department or sector.
Many of the likely threats are, at fi rst glance, far outside of
your organization ’ s control. Given this reality, do you just accept
the premise that you have to live with these risks? No. You can and
need to take steps to mitigate the threats. These mitigation steps
can involve numerous action plans, including but not limited to:
• Diversification of suppliers and transportation routes and
modes
• Shrinking the geographical size of the supply chain
• Improved communication, standards, and enforcement actions
• Changes in localized inventory programs to avoid a helpless
unavailability of materials due to circumstances beyond your
control
Keep it simple and try to keep good relations with all stakeholders to reduces lead time and timely delivery.
We can talk very long about this topic but this is enough GOOD PLANNER, TRUSTFUL, and the man of WORDING and RESPONSIBLE supplier not reduce the chances but some time finish that risk from business .
Companies should develop supply chain strategies that explicitly consider two parameters that “amplify” the negative impact of disruptions on customer and brand performance: globalization and product/process complexity. Companies should also design strategies
with countermeasures i.e.:
• Improved visibility to key supply
chain nodes that can quickly
detect disruptions.
• Well-positioned resources that provide
short-term recovery plans.
• Long-term collaborative approaches
to eliminate disruptions in the future.
The companies should take care to invest more in improved inventory and capacity visibility systems as well as to invest in longer term solutions such as training and collaborative tools to establish resilient supply chains that are agile and able to respond to disruptions.
I don't believe that any danger concerning the business activity, would ever be eliminated because the future in general is unpredictable and this was the case from the dawn of mankind. Even in most stable countries there's always some kind of risk. So, the business world is unstable and you can predict some things and hope for others but you don't know for sure if things would go as you planned them.
Sir, we cannot take this easy . Everything could be set right- if we want it toget right . It needs little time & money . Be, positive & answer is in front of you .
actually, I am far from supply chain, but the matter of put a strategy & take a risk due to the unstable future is something that u face in all management types. for example in Marketing we have a great risk due to market statue, financial crises, customers needs, etc.. therefore we have strategy, plan A, plan B, out source variables, in source variables.
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