Keeping an Eye on the SUPPLY CHAIN: Six questions boards need to ask leadership about risk oversight.

• Author: Jackson, Tandra
• Position: A WORLD OF RISK

Because of supply chain disruptions, the transition of the global economy and pressures on global trade as a result of economic sanctions imposed on Russia in response to its war with Ukraine, many organizations are reassessing their supply chain strategy with a focus on building resilience, assessing potential risks and creating long-term value.

Concurrently, ESG issues and the evolving role of businesses in society are increasing pressure on corporations to move toward more sustainable business models. These demands are coming from all directions--investors, ratings and research firms, employees, customers, regulators, governments and the media. The SEC's recent climate disclosure proposal will accelerate timelines to operationalize ESG strategy.

THE IMPACT OF ESG AND CYBER ISSUES

ESG will be a driving factor in decision-making as companies plan for the future of their supply chains. From a boardroom perspective, a top priority should be managing the range of ESG risks in an organization's supply chain, including climate change and other environmental risks; human rights issues, such as forced labor and child labor; worker health and safety; and diversity, equity and inclusion.

In addition, the pandemic highlighted cyber risks as a major potential threat to supply chains --one that can halt the global economy. Cybersecurity operations are secure only when the entire end-to-end supply chain is protected from potential threats and vulnerabilities. Building cyber resilience into the supply chain is a board and business imperative.

To oversee supply chain risks and sustainability efforts, a board must address a challenging and complex set of issues, such as reputational damage and deficiencies in resilience, in the short term and long term. To overcome these challenges, we see boards engaging more robustly with management teams about building and maintaining sustainability in operations. Developing and executing a supply chain strategy that addresses ESG issues and prioritizes cybersecurity can create value, mitigate risk, build stakeholder trust and deliver a competitive advantage.

To transform their supply chains to be more resilient and future-proof, companies should consider:

* Developing more local and regional supply chains.

* Reexamining the structure and footprint of their supply chains.

* Diversifying their supplier base.

* Updating risk and vulnerability assessments.

* Deploying technology to improve visibility and risk management.

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