Effective supply chain risk management a concern for SMEs

Managing supply chain risk is a daily task for Eric Legrand, Head of Risk Management and Internal Control at Mutuelle Nationale des Hospitaliers (MNH), a mutual health insurer. The firm, based in Montargis, a town 110km to the south of Paris, relies heavily on health providers to guarantee the quality of its service and so is no stranger to supply chain risk. MNH is one of the largest mutual health companies in France, with over 1 million customers. It mostly serves those who work in France’s comprehensive health and social services sectors, having been created in 1960 predominantly to service this group’s needs. Despite the large number of members who rely on its services, with just over 800 staff MNH is very much a mid-sized company. And of course, risk management plays a vital role in protecting those that rely on its services when they need it most.hide“For us it is important to be sure about the risks we take for our members,” Mr Legrand said. “We have to know whether we have enough financial strength to cover the costs incurred by our adherents in case of illness or hospitalisation. “I work with our largest suppliers, analysing all the linkages we have with them, and what they do, or should do, to manage the risks that could affect our relationship,” Mr Legrand continued. “The next step is to present my views about the risks to our top management. Then we discuss whether we will manage or transfer the risks, or even cancel the contract.” He added: “Companies have a responsibility concerning the processes and activities that they delegate to third parties. Therefore, we cannot separate ourselves from their risks. The risks of our suppliers are our risks too.” From a risk management point of view working with third parties necessitates close monitoring of their behaviour. “We must remain vigilant and anticipate the risks to which our suppliers are exposed,” Mr Legrand said. “We must also guarantee that the quality of the services they supply us meets our requirements. In this case there is the issue of the know-how that suppliers have, which is something that really could get out of a company’s control.” Both risk management at mid-sized companies and supply chain risks will be discussed at the 21st Rencontres AMRAE in Lyon where Mr Legrand will host a workshop on the subject of supply chain risk. For mid-sized companies, along with their larger peers, prevention is undoubtedly the best tool to mitigate supply chain risk, he will tell the conference, which is being held from 6 to 8 February. Great attention must therefore be paid during the initial stages of a business partnership. The signing of a contract, for instance, is a step where many risks can be avoided—or bred. “Risk managers need to define, before the contract is signed, what risk management processes will be implemented,” Mr Legrand told Commercial Risk Europe prior to the AMRAE event. “And the very signing of the contract represents an important aspect of risk management.” Supply chain risks can take several forms. In some instances companies that promise to provide a product or service are not up to the task when it comes to delivery. In others, suppliers can compromise quality in the name of cost cutting. Alternatively, a partner may not be prepared to play fair, which can result in an unbalanced relationship. This is a particularly big risk for SMEs. “Some companies have an extremely dominant position in the market and they can create distortions in the contractual relationship with their clients to their advantage,” Mr Legrand said. After the contract is signed it is necessary to check on an ongoing basis that its commitments are being met, he added. That is where quality policies as detailed in the ISO norms on quality systems are invaluable, he continued. Measures must also be in place to deal with worst-case scenario supply chain failures—as occurred following the spate of natural catastrophes in 2011. “When defining their strategies to manage supply chain risk, companies sometimes implement a business continuity plan, in other instances they decide to work with a large number of potential suppliers,” Mr Legrand said. “Insurance solutions take the position of a secondary line of defence.” “Our risk management strategies are aimed at adding value and especially at involving everybody in the company,” Mr Legrand pointed out. “They do not necessarily create more costs, as we focus on doing things better.” But risk management initiatives that add cost are still likely to be a good investment as failure in supply chains can threaten the very existence of an organisation, said the risk manager. “Companies have become so interlinked that it is very difficult to set up a business continuity plan, but we cannot look for savings in this area,” Mr Legrand said. Data handling is one area where Mr Legrand and his company will not cut corners. “Of course, if we develop a recovery plan for our data with one of the biggest IT service firms, costs will be significant,” Mr Legrand said. “But there is no debate within the company today whether we should do this or not. We work with the data of hundreds of staff members and up to one million adherents, so it is not even conceivable that IT security would not be part of our business continuity plan.”

Effective supply chain risk management a concern for SMEs

Want to read this article?

Read Next

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

AM Best improves outlook for Spanish market as talks underway to boost nat cat scheme

Survey suggests risk management losing gains made since pandemic

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

AM Best improves outlook for Spanish market as talks underway to boost nat cat scheme

Survey suggests risk management losing gains made since pandemic

Want to read this article?

Read Next

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

AM Best improves outlook for Spanish market as talks underway to boost nat cat scheme

Survey suggests risk management losing gains made since pandemic

Related Articles