Executive Briefings

Marsh: Most Companies Unprepared for Rising Level of Risk in Their Supply Chains

And it isn't just about fraud. Says Marsh Inc.: "Most businesses are ill-prepared to handle the rising risk levels, caused by more global and complex supply chains that are increasing supplier disruptions, logistics delays, and product recalls and safety issues." A recent Marsh study of 110 North American risk managers found that none considered their companies to be "highly effective" at supply chain risk management. Just 35 percent saw their organizations as "moderately effective," while 65 percent described their supply chain risk programs as having "low" or "unknown" effectiveness. Some lacked any formal risk effort at all. Yet nearly three-quarters of the respondents believe their supply chain risk has risen since 2005, and a similar number saw supply chain disruptions as having an increased financial impact. "Concerns about supply chain risks and supplier issues are reverberating in boardrooms and among shareholder groups throughout the U.S.," says Beth Enslow, author of the report and a senior vice president in Marsh's Supply Chain Risk Management Practice. "Yet, at this point, most organizations are just beginning to take the steps needed to manage these challenges effectively." Marsh recommends formation of a cross-functional team involving purchasing, manufacturing, logistics, finance, legal and risk-management. Only 31 percent of respondents have taken that step. Even worse, just 19 percent of companies with more than $1bn in revenue have created such teams. The "siloed" nature of supply chain functions makes it tough for companies to assess their supply chain risks, especially in the areas of product safety and supply dependability, Marsh says.

www.marsh.com

And it isn't just about fraud. Says Marsh Inc.: "Most businesses are ill-prepared to handle the rising risk levels, caused by more global and complex supply chains that are increasing supplier disruptions, logistics delays, and product recalls and safety issues." A recent Marsh study of 110 North American risk managers found that none considered their companies to be "highly effective" at supply chain risk management. Just 35 percent saw their organizations as "moderately effective," while 65 percent described their supply chain risk programs as having "low" or "unknown" effectiveness. Some lacked any formal risk effort at all. Yet nearly three-quarters of the respondents believe their supply chain risk has risen since 2005, and a similar number saw supply chain disruptions as having an increased financial impact. "Concerns about supply chain risks and supplier issues are reverberating in boardrooms and among shareholder groups throughout the U.S.," says Beth Enslow, author of the report and a senior vice president in Marsh's Supply Chain Risk Management Practice. "Yet, at this point, most organizations are just beginning to take the steps needed to manage these challenges effectively." Marsh recommends formation of a cross-functional team involving purchasing, manufacturing, logistics, finance, legal and risk-management. Only 31 percent of respondents have taken that step. Even worse, just 19 percent of companies with more than $1bn in revenue have created such teams. The "siloed" nature of supply chain functions makes it tough for companies to assess their supply chain risks, especially in the areas of product safety and supply dependability, Marsh says.

www.marsh.com