In the post-pandemic world, volatility and uncertainty have expanded the daily risks businesses face. War, global economic uncertainties, price modulations and competition in the supply chain, and other related factors have made sustainability and climate change concerns central to every conversation. Large corporations are responding by prioritising risk monitoring and management.
In today's global economy, large enterprises rely heavily on complex and extensive supply chains to source raw materials, manufacture products, and deliver goods and services to customers. However, supply chain risks and disruptions have serious consequences for businesses.
Such complex supply chains can create significant risks for large enterprises, such as disruptions in the supply of materials, traceability, reputational damage caused by suppliers engaging in unethical or illegal practices, and compliance risks associated with regulations governing supplier activities. Supply chains are, therefore, a critical component of risk management for large enterprises.
However, the traditional methods of risk management are no longer sufficient in the current dynamic and rapidly changing business environment. In order to stay ahead of the curve and remain competitive, companies must adopt advanced technologies and tools that help manage risk more effectively.
The recent 2022 Global Risk Survey by PwC 2022 Global Risk Survey by PwC revealed some interesting facts in this context.
● Around 65% of the organisations surveyed have increased their spending on risk management technology
● 75% are planning on increasing spend across data analytics
● 74% on process automation
● 72% technology to support the detection and monitoring of risks
While enterprises manage their supply chain risk exposure, it becomes an added burden to ensure that their SMB Suppliers recognise the types of risks they need to track and tackle. When it comes to monitoring supplier risk, there are several different types of risks that enterprises need to address with their suppliers. These include
1. Financial risk: This includes the risk of supplier bankruptcy, financial instability, or other financial issues that could impact their ability to deliver goods or services
2. Quality risk: This includes the risk of poor quality products or services provided by suppliers, which could impact the reputation of the enterprise
3. ESG risk: This includes the risk of suppliers engaging in unsustainable practices, which could damage the environment and impact the enterprise's reputation. Add to this, their actions may disrupt the social setup leading to further disruption
4. Compliance risk: This includes the risk of suppliers not complying with relevant laws and regulations, which could lead to legal and reputational consequences for the enterprise
5. Geopolitical risk: This includes the risk of political instability or trade disputes impacting the ability of suppliers to deliver goods or services
6. Cybersecurity risk: This includes the risk of cyber-attacks on the digital supply chain, which could compromise sensitive data and disrupt operations
Out of these, the ESG risks, which typically include compliance and cyber security, are increasingly of critical importance. To manage these supply-side risks, large enterprises need to develop robust supply-chain risk management strategies that involve ongoing monitoring and assessment of supplier activities. This can include conducting supplier audits, developing risk mitigation plans, and implementing technology solutions to monitor supplier activities and identify potential risks.
By investing in risk management technology enterprises can achieve the 5 Cs of Business Efficiency:
● Clarity through risk identification: With risk management technology tools, corporations can easily identify potential risks that may arise in their business operations. These tools can analyse vast amounts of data from different sources to provide them with a comprehensive view of the risks facing their business
● Control by mitigating risks: Once the risks have been identified, risk management technology tools can help executives take proactive measures to mitigate them. By automating processes and streamlining workflows, these tools can help them quickly respond to risks and minimize their impact on their business
● Competence resulting in improved decision-making: Risk management technology tools can also help large enterprises make better decisions by providing them with real-time information and insights into potential risks. By having access to this information, they can make informed decisions that will help mitigate risks and take advantage of new opportunities
● Cost-effectiveness through increased efficiency: By automating processes and streamlining workflows, risk management technology tools can help increase operational efficiency. This can help reduce costs and improve the bottom line, while also improving the quality of the products and services
● Complete Compliance: With risk management technology tools, companies can stay compliant with regulatory requirements and industry standards. These tools can help track and report on compliance efforts, ensuring that enterprises are meeting all necessary requirements
By encouraging their suppliers to understand and monitor risks, enterprises can gain greater visibility into the sustainability practices in their supply chains and can manage their risks better. This can help enterprises to improve their overall sustainability performance and enhance their reputation with customers, investors, and other stakeholders.
To achieve this, enterprises must adopt technology tools that help them gain data clarity, address compliance, build competence within their supplier base, and control and manage risks. This is possible today at a low cost of ownership in platforms such as Treeni’s resustain™ SMB that provide automated data collection from their entire supply chain using templates. With resustain™ SMB ESG reporting is neither complex nor expensive and creates long-term value and helps enterprises manage their net zero journeys.