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The majority of companies see supply chain risk management as important to their business, but only 7 percent are generating returns of more than 100 percent on their supply chain risk management investments, according to a study of more than 1,000 companies worldwide by management consulting and technology services specialist Accenture.
However, the survey also found nearly 70 percent of leaders said their investments will generate a return of at least 100 percent in the next two years, as opposed to 4 percent of others.
About three-quarters (76 percent) of companies participating in the survey described supply chain risk management as important or very important.
Industry leaders were nearly three times as likely as other companies to say they planned to boost their investment in risk management by 20 percent or more in the next two years.
The top three sources of risks identified by senior operations executives are IT (39 percent), cost and pricing factors (39 percent) and the global economy (37 percent).
Natural disasters or unforeseen events, such as the Thai floods or the tsunami in Japan, were only cited by 17 percent of the respondents, making that the least frequently flagged risk.
“As demonstrated by the leaders in our study, a centralized, top-down approach to supply chain risk management tends to generate the highest ROI on risk management,” Mark Pearson, senior managing director of strategy and operations at Accenture, said in a statement. “Such a commitment to risk management also can help managers guard against business disruptions in the wake of natural disasters, geo political events, shifts in commodity or shipping prices, or any number of circumstances that can endanger a company’s operations.”
Forty-three percent of leaders versus 32 percent of others had a central risk management function led by an executive in the C-suite or a vice president who oversees all of their risk management activities.
“Although unforeseen events or natural disasters lead some to give up on risk management, most risks can be managed to not only minimize the downside but also to gain a competitive advantage as a result of being prepared to respond to circumstances when they arise,” Pearson said. “Scenario planning and robust analytics can play a key role in developing effective risk mitigation strategies.”
In addition, 61 percent of the leaders as compared to 37 percent of other companies make risk management a strategic imperative and recognize the importance of capabilities that help them gain greater visibility and predictability across their supply chains.
The areas most frequently exposed to those and other risks in the corporate supply chains were quality (45 percent), planning (39 percent), supply chain skills and talent (38 percent) and sourcing and procurement (37 percent), according to the executives.