A surprising finding of the study was that a formal executive oversight committee that includes the CEO, chief financial officer or chief operating officer does not correlate to supply chain risk management performance improvements.
Participants with formal C-level oversight did not experience a lower financial impact of supply chain disruptions or a higher degree of supply chain risk management effectiveness than their peers. They also are no more likely to have consistent processes or testing of supply chain contingency plans than companies that lack an executive oversight committee.
The study did find, however, that executive oversight leads to more risk manager responsibility for uninsurable supply chain risks and for providing risk advice on tactical/operational supply chain activities such as supplier delays.
Although a formal executive committee is not a silver bullet, it is still critical to secure top management support. "You must have senior management support to gather the required information in the organization," advises a participant from a large consumer products manufacturer. "A 'Risk at a Glance' executive report should be used to ensure continued support from the top."
Increasingly, risk is being incorporated into the formal corporate strategic planning process to ensure physical assets such as plants do not have geographic concentration points and to eliminate single points of failure in the supply chain.
Leading companies are instituting regular operating segment and business unit conversations about supply chain risk. These discussions are vital to ensure that business unit leaders and general managers are sufficiently accounting for and managing risks as their business conditions and strategies change.
Many enterprises with corporate risk management functions are implementing policies that make business unit heads responsible for conducting risk assessments and impact analyses on a yearly basis. This includes developing and testing business continuity plans for all critical assets, with "criticality" being defined as any asset that generates a certain level of contribution margin.
These assets can include:
-- Plants, distribution centers, stores, office locations and data centers
-- High-importance brands, products or components
-- Business processes
-- IT applications and physical and electronic data
-- Critical suppliers and all third-party risks such as logistics providers and co-packers, including the critical infrastructure or utilities they rely upon such as water and power.
(Find the complete Marsh supply chain survey report here.)
April 15, 2008
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