Future Directions in Supply Chain Risk Management • 293
transportation vehicles. During this phase most companies begin their
risk assessment using emerging tools such as third- party supplier assess-
ment tools and web- based heat maps that evaluate risk across the entire
supply chain. Readers of this book have free access to a web- based Supply
Chain Risk Heat Map Assessment tool that is featured in the appendix.
Companies are also beginning to develop Business Continuity Plans
(BCPs) for every node in their supply chains.
Supply chain leaders are starting to map their supply chains in an eort
to better prepare for and respond to both demand and supply disrup-
tions faster than their competitors. Let’s not forget that SCRM is a relative
game. e ability to be alerted before your competition regarding a risk
event and being able to respond faster will become a critical success factor
dening global excellence.
Predictability
As companies progress in their journey, we expect to see them leverage
their visibility capabilities to stress test their supply chains in terms of
what- if scenario planning. ese exercises, utilizing network optimization
and probabilistic modeling and mapping tools, provide a view into how
supply chains might react to demand and supply disruptions. is insight
will help companies build risk response plans.
Within this stage, companies are also leveraging third- party tools that
include fraud and corruption methodologies and alerts along with new
techniques, protocols, and supply chain dashboards. One result of this
will be the development of supply chain risk war rooms. ese war rooms,
supported by new tools and techniques, will support the ability to be more
proactive, relative to risk events, by identifying the risk through alerts,
assessing the risk utilizing probabilistic tools, mitigating the risk through
new risk protocols, managing the risk and, at times, even turning the risk
into an opportunity.
Resiliency
Companies at this stage are shoring up their organizational infrastruc-
tures through corporate frameworks such as ERM; governance, risk, and
compliance (GRC), and ISO risk standards culminating in Risk Centers of
Excellence (COEs). Risk management leaders are also instituting new key
risk indicators such as Time- to- Recovery, Value- at- Risk, and Resiliency
294 • Supply Chain Risk Management: An Emerging Discipline
Indexes. ese frameworks, protocols, metrics, and organizational struc-
tures provide a foundation for operational excellence in risk reduction and
competitive opportunity management.
Sustainability
Companies in this stage are leveraging predictive analytics to develop
“what- if” scenarios, maintaining a corporate- wide risk management
framework, and building and maintaining a risk- adjusted culture sup-
ported by risk performance measures. All of this becomes a sustained
part of the corporate culture. e leaders in this stage also continually
assess their risk prole, evaluate their risk appetite regularly, and leverage
their risk- adjusted knowledge base in order to update their supply chain
risk insurance portfolio. ey also achieve real- time risk event informa-
tion from third- party providers and embed those alerts and information
within their supply chain risk infrastructure and SCRM war rooms.
e SCRM journey is one of small steps. Each stage builds additional
knowledge and expertise that needs to be codied, institutionalized, and
reinforced. Supply chain leaders that are further along in this maturity
mode understand that each stage in the journey corresponds to two to
three years of continuous eort.
A CALL TO ACTION
A premise throughout this book is that future supply chain stability and
success will be linked closely to a company’s risk management capabili-
ties. e following builds on this important premise by presenting a set of
actions that provide managerial guidance.
Establish the Risk Leadership Team
It almost goes without saying that becoming a leading risk management
organization will not happen without individuals who are capable of
making risk management investments while demonstrating risk manage-
ment leader ship. Given the magnitude of change a typical company faces
as it works to elevate its risk management capabilities, it should come as
no surprise that supply chain managers must become risk management
Future Directions in Supply Chain Risk Management • 295
leaders. A continuous challenge facing organizations concerns how to
develop a generation of leaders who understand how to make risk man-
agement a critical organizational competency.
One way to link leader ship and risk management is to make risk man-
agement responsibility an important part of executive leader ship steer-
ing committees. Leading companies, for example, have in place executive
steering committees that are responsible for setting the strategic direction
for their sourcing groups. Figure15.3 illustrates the actual responsibilities
of a steering committee at a leading company. (For our purposes we have
added an additional responsibility related to risk management.) Wherever
leader ship teams exist in the corporate hierarchy, the opportunity pres-
ents itself to embed risk management responsibilities. And it is equally
important to establish the risk communication hierarchy.
As an aside, leader ship is not the exclusive domain of executive leaders.
Whether an individual is a buyer- planner, commodity team leader, supply
chain manager, or vice- president, each will have an important role to play
in the evolution of supply chain risk management. Each must demonstrate
leader ship at the appropriate level.
Establish Risk Crisis Teams
Seasoned supply chain professionals know that “stu” is going to happen.
e question is not if something will happen, but when and how severe
Establish strategic
direction for
commodities
Drive consistent
policies, procedures, and systems
worldwide
Establish corporate savings
targets
Establish sourcing strategy
development teams
Coordinate strategy
development
with other groups
Measure compliance to
corporate agreements
Executive Supply Leadership Council Responsibilities
Coordinate company-wide
risk management initiatives
FIGURE 15.3
Supply leader ship and organization.
296 • Supply Chain Risk Management: An Emerging Discipline
the consequences might be. In a crisis every second matters, making the
establishment of risk management crisis teams something that should be
on the agenda of any organization. ese teams, staed with the right
professionals who have access to real- time data and information, are an
indispensable part of the risk management process. Chapter14 featured
Boeing’s approach for managing threats and crises through the use of
dedicated teams.
Focus on the Risk- Management Enablers
Chapter3 presented the idea of organizational enablers, four distinct areas
that support more advanced supply chain and risk management initia-
tives. ese enablers include a supportive organizational design; informa-
tion technology systems that provide real- time or near- real- time visibility
to data and information; risk- related measures and measurement systems
that provide insight into potential risks as well as the eectiveness of risk
management eorts; and the availability of capable human resources.
Various dimensions of risk should be quantied and reported regularly to
senior leader ship.
e development and use of risk management tools, approaches, and
strategies must become more commonplace, and that demands building a
foundation of people, systems, measures, and organization that supports
risk management excellence.
Assess the Current State of Risk Management Preparedness
Recall from our earlier discussion that as the concept of SCRM began to
evolve, a mechanism to evaluate a company’s maturity in supply chain
excellence and design took shape in terms of a “spider diagram.” is dia-
gram, which proles a company’s supply chain maturity, has evolved into
a supply chain risk awareness heat map. e heat map provides insight
into a company’s exposure to supply chain risk and the state of its risk
management preparedness. It is an awareness technique that starts a dia-
logue about supply chain risk.
e heat map tool is used to establish an enterprise- wide picture of
a company’s supply chain and risks through questions- of- discovery
answered by representatives from multiple disciplines. e assessment is
critical for understanding a company’s “as is” risk management state. e
Future Directions in Supply Chain Risk Management • 297
appendix of this book provides more detailed insight into this powerful
and emerging approach to supply chain risk management.
Perform Risk Assessments and Develop Risk Management
and Business Continuity Plans
Recall from Chapter1 that a risk analysis or risk assessment is the process
of qualitatively and quantitatively assessing potential risks within a supply
chain. e objective here is to identify and categorize risks without focus-
ing strictly on obvious risks. e risk assessment should be expansive in
its scope.
Aer performing risk assessments, it is time to articulate risk manage-
ment strategies and business continuity plans. Remember from Chapter1
that a risk plan is a document that considers known risks and includes
descriptions, causes, probabilities or likelihood of risk occurrence, costs,
and proposed risk management responses. e risk plan should be widely
communicated with regular updates and progress reports. And recall from
Chapter7 that business continuity planning is the process of planning for
and implementing proactive, preventive procedures that are designed to
enable continuous operations of critical business processes and functions.
Gain Visibility across the Supply Chain
As we refer back to the Supply Chain Risk Maturity Model, the impor-
tance of supply chain visibility is clear. It is hard to envision becoming a
risk management leader without a strong awareness of what is occurring
across the supply chain. And visibility starts our risk management pro-
gression toward the more advanced phases of SCRM. A question logically
becomes where we need supply chain visibility. A partial visibility listing
includes the following:
• Location and performance of subtier suppliers
• Current and predicted operational performance of key tier- one suppliers
• Updates of supplier nancial health
• Real- time location of materials and transportation assets
• Employee movements worldwide
• Hazard risks such as conicts and weather
• Changes to supply and customer markets
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