Businesses are exposing themselves to legislative and regulatory risk by not learning lessons from 'near misses' arising from supply-chain disruptions, according to new research.
Legislation such as the Modern Slavery Act 2015 will force commercial organisations over a certain size to disclose what activities they have undertaken to eliminate slavery and human trafficking from their supply chains.
However, a report on the extent and causes of supply-chain disruption shows an overwhelming lack of supply-chain visibility among businesses.
According to the Supply Chain Resilience Report 2015 by insurance company Zurich and Business Continuity Institute, half of respondents said their immediate supplier (tier 1) was the predominant source of disruption.
But Nick Wildgoose (pictured), global supply chain product leader at Zurich Global Corporate, said he was more concerned about the level of disruption arising further down the supply chain.
One in five businesses experienced disruption with their supplier’s supplier (tier 2). Nearly one in 10 (8%) saw disruption much lower down the supply chain.
Nearly a third (31%) of businesses said they did not analyse the full supply chain to identify the original source of disruption.
Wildgoose said businesses were ‘not planning lessons that [they] could be from near-misses’.
The three biggest causes of supply-chain disruption were unplanned IT and telecommunications outage (64%), cyberattacks and data breaches (54%) and adverse weather (50%).
More than half (58%) of respondents did not insure losses from supply-chain disruption. One in 10 reported losses of at least €1m arising from a single incident.
Wildgoose said many companies were doing a ‘fantastic job’ on financial due diligence but not considering other factors such as, for instance, the flood and political risks in relation to where their factories are.
‘All that good work may come to nought. It’s important to have a competitive approach to the risk assessments that you do,’ Wildgoose said.
Paying closer attention to their supply chains brought benefits beyond minimising risk, Wildgoose added, such as closer relationships with key suppliers and innovation.
‘At the end of the day, if you do not manage the risk, both sides suffer.’