Aon recently released a report that outlined the top three risks identified by the retail industry. The report found that these top three risks were also in the list of top ten risks that the retail industry was the least prepared to face.
These risks are of concern to the retail industry because of three characteristics; their complexity, their difficulty to control, and their enterprise-wise affect and scope.
Supply chain management is largely about interconnectedness. When planning for and managing the sourcing, procurement, conversion and logistics related to your product offering, companies need to create the right relationships with the right companies. This will help to optimize the movement and storage of materials and inventory while at the same time preparing for disruptions. Striking the right balance is not easy.
If you stretch your supply chain too thin, you subject it to vulnerability and leave room for disruption in your operations. If you don’t actively seek ways to improve your supply chain and its processes, you’re missing out on the ability to make related operations run more effectively and efficiently.
Globalization and new market realities that allow just-in-time manufacturing, outsourcing and lean manufacturing have further complicated supply chain management. While it brings great opportunity to companies big and small, it also brings considerable risk. If you do it right, a flexible and optimized supply chain can not only free up resources within the organization, but it can also decrease the cost of goods and increase the number of markets that you can occupy. However, mismanage your supply chain, and a disruption can decrease revenue and market share, and can increase costs considerably.
When one of the links in the chain fails, what do you do?
Risk management planning can be such a huge investment for a small to medium-sized organization. It is crucial to ensure that your risk management dollars are going to good use by making sure that you are managing the right risks – those that present the most severe consequences or that hold the highest likelihood of occurence.
How do we make sure we’re managing the right risks?
An ounce of prevention is worth a pound of cure! I wonder what risk analytics software they ran to come up with that ratio? For thousands of years human experience has evolved to the point where we have become genetically programmed to know this. Yet we consistently ignore it! Dan Gardner‘s book “Risk: The Science and Politics of Fear” addresses this paradox extensively. Why, if we know what the money spent preventing risk will produce exponential returns, do we so often choose to ignore risk management and take our chances?
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