Global supply chains are increasingly complex and interconnected. In turn, the consequences of disruptions to them have become increasingly difficult to assess. Whether the threat comes from unknown exposures in your supply chain, natural disasters, or geopolitical events, being able to identify and proactively address supplier risks is critical to the resilience of your business.
According to Swiss Re's sigma experts, identifying critical suppliers is key for improved accumulation management, especially unique suppliers of specialised or scarce products.
An event at a small cluster of factories could have a large ripple effect regionally or globally. Disruption at a small but deeply networked supplier shines a light on supply chain interdependencies. A single breakdown can quickly ripple across the globe with devastating financial consequences. For example, a fire at a magnesium die-cast plant in the United States in May 2018 disrupted worldwide automotive supply chains.
Major automakers temporarily idled plants as they determined how to restore production.
Meanwhile, many plastics suppliers in Europe recently issued alerts that certain materials used to produce car parts were in short supply. The root cause was shortage of adiponitrile, a chemical that is manufactured at only five plants in the world.
Reconciling and combining external data sources into a flexible data structure can offer tangible insights into an industry's supply chain.
According to Swiss Re: “Risk managers need to understand these key-dependencies. By combining external data sources, and using sophisticated risk and data modelling techniques, we help risk managers gain a deeper understanding of the various dimensions of their connected risk.”
Russell Group may have mentioned the concept of connected risk before!
We are certainly on the same page as Swiss Re, which states that: “understanding of the vulnerability of a supplier location can be used to steer procurement strategy and in some cases trigger the engagement of loss prevention experts to advise the supplier. These insights help ensure that risk managers focus limited resources for risk mitigation strategies on those areas that are most vulnerable.”