Supply chain a strategic risk

With business interruption cited as the number one risk by risk professionals the world over in the annual Allianz Risk Barometer for four consecutive years, it is no wonder supply chain risk remains high on the risk agenda. Commercial Risk Africa recently held a one-day forum in Johannesburg, together with the Global Transport Asset Intelligence Bureau, as Liz Booth reports Businesses must consider their supply chain risks at a strategic level if they are to successfully grow, according to a group of southern African specialists. Speaking at a recent supply chain forum held in the Diageo offices in Johannesburg, and organised by Commercial Risk Africa and Global Transport Asset Intelligence Bureau (GTAIB), Nico Snyman, president of GTAIB, warned that it is one of the most vulnerable and weak points of any business, particularly as it grows. “Remember that just one container of goods could be worth ZAR30m or ZAR40m,” he said. “How do you as a business and we, as a collective, take ownership of that risk?” He reminded delegates that the incidence of hijacking in South Africa has risen 54% in the past year. “Businesses are failing because they are not serious enough about risk management,” he warned. Mr Snyman cited the Institute of Risk Management South Africa’s recent risk report, which had corruption as its number one risk for 2017. “At number five was leadership and at ten it was good governance,” he explained, “all those in between were failures of structures.” Outlining the role of the newly formed GTAIB, he said the group had both the experience and exposure to add value to the risk management of supply chains. Too often, he said, companies were taking the wrong approach to securing their transport. For example, he said, they may employ security guards but have been unable to conduct sufficient security checks on them. Another example is the numbers of businesses using off-duty policemen as security guards. “They are like ghosts, though, and will disappear in the face of an incident,” he said. Others have experience of guards who wave around fake guns, causing more of a risk of escalating an incident than of stopping it. “It is a false sense of security,” Mr Snyman warned. “You think you have acted but it is not going to actually help.” Another live example is that of a business who gave the drivers the option of two routes – one had three stops and the other 15 but they let the drivers choose rather than risk managing the route, which would have resulted in taking the three-stop option – in fact the drivers chose the other one. For the future, Mr Snyman said there needs to be greater awareness but also much more detail and data. The sector, he said, has little to go on, making it hard for risk managers to act but also for insurers to transfer the risk off the business’s balance sheets. The situation becomes even worse if businesses are operating across borders. “You may have some intelligence about the situation in South Africa but if you are going into Zambia or Uganda, what is the body of knowledge?” he asked. “If you know your risks you can control and mitigate it. People risks are a huge challenge for business at lots of levels and supply chain is no exception. It is likely to get worse as well. South Africa is in recession, it has junk status and it will be more difficult to do business. “The socioeconomic picture is looking increasingly gloomy and risks are escalating.”

Supply chain a strategic risk

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