Supply chain risk management and resilience training can help an organization establish and maintain strong defensive layers against unknown risks, as well as respond more quickly in the event of a severe crisis or operational threat. Most of the risks that could disrupt your operations fall into these four broad categories:
- Economic.
- Environmental.
- Political.
- Security.
With the rise of cybersecurity issues and challenges imposed by the COVID-19 pandemic, the focus on risk management and resilience training has skyrocketed. The key change has been to recognize that a firm’s risk exposure is far wider than its own physical operations. Risks can occur from a supplier’s supplier and a customer’s customer. These tangential and ancillary risk factors have to be considered and accounted for when conducting risk assessments and tactically executing risk management strategies.
History of Risk Management and Resilience
Risk management as a practice was historically motivated by supplier relationship management frameworks that created a supplier segmentation. One criteria of that segmentation was identification of categories that were constrained or at risk. This process created a focus on sole source suppliers as a risk, for example. Risk management and proactive assessment and mitigation leading to resilience also gained focus in lean cultures where a failure mode and effect analysis tool was used for large projects and transformations. This tool asked the following basic questions:
- What could go wrong?
- What is the probability?
- How can we prevent the risk?
- Can we be ready to mitigate if it occurs?
The formal practice of risk management and resilience gained traction in large corporations, typically within global supply chains. The process can be taught and built in as part of an annual planning process. Increased focus on risk management and resilience typically occurred after a large event like Fukushima, the nuclear disaster that triggered the most powerful earthquake and tsunami in Japan.
History has shown us that the focus on risk management as a skill can increase after triggering events but then steadily declines after just a few years. Simply put, humans tend to not act as proactively as necessary unless there is an emergency. Everyone wants to buy insurance the day of an accident, but after years of safe driving, what’s the point?
An early catalyst for the development of formal risk management was the environmental movement in the 1960’s that drove a focus on air and water pollution and eventually to the sources of those issues. Companies whose products or raw materials were connected became aware of these inherent risks, and in many cases, in painful ways.
In my professional experience, a greater catalyst has been the growth of global supply chains led by the advent of China as a global player and the European Union (EU) as a cross border collaborator. A final catalyst has been the emergence of global strategic sourcing and procurement as an opportunity and a practice.
Supply chain risk management leaders were those who were impacted and who benefitted by these issues and opportunities. They included large multinationals with global markets for both products and inputs. Many of these also went through periods of investment in process management and improvement focus areas like total quality management (TQM), Six Sigma and lean practices. Assessing the capability and assurance of extended supply chains evolved as a result.
Today, many employers implement risk management training to protect the business from litigation and risk. In lieu of the digital transformation, with most businesses being conducted online, cybersecurity prevention training has become even more of a necessity.
Risk Management and Resilience Training
Training your people on how to avoid and detect risk is crucial to staying afloat in today’s business world. Now that you understand the history of how risk management was started, let’s take a look at best practices to train your people on to promote a safe and risk-free organization.
Impacts on technology and automation.
Global visibility tools and public risk assessment measures and dashboards can offer great support for those who need to increase their proactive risk assessment and monitoring. Training your people on how to manage these tools can help keep your business safe from potential dangers. Many large firms now have “always-on” monitoring as part of their capability. And with weekly monitoring as an industry standard, it is important to keep employees abreast on risk management policies and regulations as well.
Risk management talent.
The core skills for risk management exist within procurement and supply chain professionals. There is open source content available that can be included in quality systems, supplier negotiations and other standard processes. There are also third party resources that can support the training and development of individuals and teams. These skills sets have started to compete with logistics as a leading function of supply chain talent pools.
Investing in risk management as a focus for your training and development is easy to do on your own and will most likely be supported by other managers. If you can translate the benefits of risk management training into an applied effort to assess and develop a risk mitigation plan for your own firm, you can deliver results now and position yourself for advancement in the future.
Case Study: Sourcing Coca Cola’s First Supply Chain Risk Manager
SCM Talent Group’s founder and managing partner, Rodney Apple, shares his experience on being tasked with hiring Coca Cola’s first global supply chain risk manager:
“The importance and popularity of supply chain risk management has grown exponentially in the last couple of decades. I recall back in the mid-2000s when I led supply chain recruitment for Coca-Cola, receiving an unusual (to me at the time) search assignment for a newly created global supply chain risk leader role. I kicked off the search with the hiring manager and began sourcing for qualified candidates, starting with the Fortune 500 corporations, assuming they would have this type of risk management expert on staff. It didn’t take very long to realize that global supply chain risk management experts were more like a needle in a haystack than a dime a dozen. The shallow talent pool created a lot of difficulty simply because there weren’t that many people back then that specialized in this area. I eventually found a great candidate for the role, and fast forward to today, there’s a lot more people in these types of supply chain risk management jobs than probably ever before.”
Conclusion
Risk management has evolved rapidly in response to the extreme growth and fluid dynamics of the global supply chain. This has created fertile ground for increased hazard and risk for many if not all organizations in today’s world of work. To combat the increased likelihood for risk, many large firms are responding to these changes with continuous development opportunities and certified risk managers. By instilling continuous learning opportunities for risk management and prevention, you can secure your organization’s future.
