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Marsh highlights supply chain risk management best practices

‘Risk Spotlight: Managing Supply Chain Resiliency in an Increasingly Risky World.’

In a Point of View article by Gary Lynch, leader of its Global Supply Chain Risk Management Practice, Marsh has presented a checklist of supply chain risk management best practices. This reads as follows:

  • Gain visibility upstream and downstream.
  • Simplify complexity by looking at resources through a value (market served or product families) lens.
  • Establish accountability for risk activities by designating ownership not by asset (these are the custodians), but by profit and loss leader, business manager, and product family owner.
  • Understand your suppliers’ supply chain and risk management plans; create risk management plans if needed, including incentives and penalties.
  • Create a business case for investment by measuring impact against risk mitigation and financing options. Establish business intelligence and leverage analytics and decision modeling to support the business case.
  • Provide holistic insurability beyond physical damage coverage. Supply chain interruptions extend to the non-physical world, including labor strikes, pandemics, regulatory change, civil order, and financial failure. The scope of coverage should also cover non-physical damage.
  • Maintain relevance by ensuring vulnerabilities are relevant to the supply chains of greatest value. Avoid strategies that focus only on threats and make that only make use of qualitative metrics.

In the article Mr Lynch also says that organizations should provide a definitive response to the following questions in order to stay focused on the resiliency objective:

  • Are we, in conjunction with our partners, continuously evaluating, evolving, and improving the resiliency programs that support our value creation activities as determined by our stakeholders (investors, customers, and others)?
  • How do we monitor volatility in our organization in relation to stakeholder behaviors, single point of failures (SPOF), and supply chain interdependencies? What levels of volatility are acceptable? When do we react?
  • What are the complete sets of resources (labor, technology, physical assets, relationships, and processes) needed upstream and downstream to deliver each product/service family to the market? Have we mapped the extended supply chain?
  • Are we collecting business intelligence about our SPOFs, including the maximum financial, brand, strategic, compliance, liquidity, and asset impact at each point?
  • Are the people, infrastructure, and suppliers that we depend on managing their market, financial, operational, and behavioral risk, at a minimum, to our expectations?
  • Are we monitoring, in real time, our most critical supply chain dependencies for our value creation activities?
  • Have we created decision models to support resiliency options at the time of the event?
  • Have we created a collective culture along our supply chains that is risk conscious, intelligent, and motivated?

Read the article

•Date: 17th May 2011 • Region: World •Type: Article • Topic: Operational risk

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