Most Businesses Prioritizing Supply Chain Risk Management

Most companies view supply chain risk management as important to their business, but only seven percent are generating returns of more than 100 percent on their supply chain risk management investments, according to an Accenture press release.

The data comes from the recent “Accenture Global Operations Megatrends Study – Focus on Risk Management.” Seventy-six percent of the companies participating in the study describe supply chain risk management as “important” or “very important.” And of the more than 1,000 companies represented across 10 industries, 25 percent plan to increase their investments in supply chain risk management by at least 20 percent over the next two years.

The study found that while almost all the companies receive a return on their investment (ROI) in risk management, the leading companies (those that generated returns surpassing 100 percent) had three practices in common that set them apart from the rest. Here are the three practices as they appeared in the press release:

1) Make risk management a priority 
  • Sixty-one percent of the leaders as compared to 37 percent of other companies make risk management a strategic imperative and recognize the importance of capabilities that help them gain greater visibility and predictability across their supply chains.
2) Centralize their responsibility for risk management.
  • Forty-three percent of leaders versus 32 percent of others had a central risk management function led by an executive in the C-suite or a vice president who oversees all of their risk management activities.
3) Invest aggressively in risk management with a specific focus on end-to-end supply chain visibility and analytics.
  • Leaders were nearly three times as likely to say they planned to boost their investment in risk management by 20 percent or more in the next two years. Furthermore, nearly 70 percent of leaders said their investments will generate a return of at least 100 percent in the next two years as opposed to four percent of others.

“As demonstrated by the leaders in our study, a centralized, top-down approach to supply chain risk management tends to generate the highest ROI on risk management,” said Mark H. Pearson, senior managing director, Accenture Strategy, Operations.

“Such a commitment to risk management also can help managers guard against business disruptions in the wake of natural disasters, geo political events, shifts in commodity or shipping prices or any number of circumstances that can endanger a company’s operations,” said Pearson.

Top three sources of risks:

Senior operations executives identified the top three sources of risks as:

1.) Information technology (39 percent)
2.) Cost and pricing factors (39 percent)
3.) Global economy (37 percent)

The least frequently mentioned risk was natural disasters or unforeseen events like the Thai floods or the Japanese tsunami – only 17 percent of respondents cited it.

“Although unforeseen events or natural disasters lead some to give up on risk management, most risks can be managed to not only minimize the downside but also to gain a competitive advantage as a result of being prepared to respond to circumstances when they arise,” said Pearson. “Scenario planning and robust analytics can play a key role in developing effective risk mitigation strategies.”

Highlights from the report:

  • 61 percent of leaders (who reported their supply chain risk management ROI exceeded 100 percent) make risk management a strategic imperative.
  • 43 percent of leaders have a central risk management function.
  • 60 percent of leaders will boost their investment in risk management by 20 percent or more in the next two years.

 

For the report, click here: http://www.accenture.com/us-en/pages/operations-megatrends.aspx#risk-management

For the press release, click here: http://newsroom.accenture.com/news/supply-chain-risk-management-now-a-priority-for-most-businesses-but-only-elite-leaders-generate-a-return-on-their-investments-in-excess-of-100-percent-accenture-research-finds.htm