Addressing supply chain risk: advances have made supply chains and transport networks more efficient, while also changing their risk profile. It's time to review plans 4 and procedures for dealing with a broad range of new contingencies.

• Author: Wright, Jonathan
• Position: Risk Management

After years of globalization, lean processes and the geographical concentration of production, most finance executives would probably say that their supply chains and transport networks have become more efficient. These advances in efficiency, however, have also changed the risk profile for their supply chains. As a result, many organizations need to take a hard look at supply chain risk and to review their plans and procedures for dealing with a broad range of new contingencies.

While supply chains have become more complex, new and different types of risk have proliferated. As a recent World Economic Forum (WEF)/Accenture report, New Models for Addressing Supply Chain and Transport Risks, points out, major disruptions over the past five years have included flooding in Thailand, the Japanese earthquake and tsunami and the Icelandic volcano, which shut down European airspace for weeks as ash filled the skies.

More than 90 percent of organizations surveyed by WEF and Accenture as part of the study said that supply chain and transport risk management has become a greater priority over the past five years. In addition to these recent events, the report notes that new risks are emerging all the time. For example, with companies relying increasingly on online systems, the growing sophistication of cyberattacks increases the vulnerability of supply chain and transport networks.

Electronic manifests for cargo and advanced passenger information for air travel have been effective in facilitating the movement of freight and people, but they put more pressure on governments and businesses to maintain information and communications networks that ensure a high degree of data integrity

New Economic Risks

Economic disruptions--including currency fluctuations, commodity price volatility, sudden downturns in demand and ownership or investment restrictions imposed by governments--have become more frequent and more visible since the financial crisis of 2008.

While globalized supply chains help lower costs and improve profitability under "normal" circumstances, many organizations now have a substantial portion of their operations outside their home countries. This opens up the possibility of new and wider-reaching disruptions across the supply chain ecosystem.

Even the basic movement of goods can be threatened by external events. Despite significant growth in international trade, cross-border movements are vulnerable to customs regimes, tariff and non-tariff...