The importance of managing risk in the supply chain
According to Avetta, 85% of companies experience at least one interference in their supply chain every year. From financial instability to data threats, greenhouse gas emissions to incidents on site, supply chains face constant threats.
In its recent cybersecurity report, Avetta outlines the hidden risks that companies should have on their radar, in order to avoid interruptions to their supply chain.
Data threats and cybersecurity breaches can completely jeopardise your supply chain
Avetta reports that 75% of companies suffered a ransomware attack in 2021. Of these companies, 40% were unable to recover data that was lost as a consequence – a major fault that could have been avoided through better data risk management.
Vulnerabilities in suppliers’ data is the single biggest cause of data threats in the supply chain. But, Avetta reassures companies that strengthening their cybersecurity is a simple and highly effective process.
First, it’s obvious that the risk management strategies of all suppliers should be checked, so that they are not increasing the likelihood of breaches. This includes examining their data security too, to make sure they’re not bringing in any threats from the outside.
Next, all employees within a company should also be trained on best practices in data security.
For example, the data security company Netwrix suggests that teams are trained to: understand the importance of classifying sensitive data in secure locations; follow a data usage policy that requires access controls; use data encryption and secure back-ups on all devices for additional protection.
Managing data threats also involves the integration of old and new critical business systems.
Disparate data costs 57% of companies US$500,000 per year, as they struggle to unite existing tech systems with new replacements.
Avetta suggests that an easy way to avoid this is to simply check a system’s open integration capabilities before investing in it – and, of course, to be aware of the integration capabilities of existing tech to make sure they are compatible.
Financial health is crucial to maintaining supply chain stability
With nearly half of supply chain risks encompassing financial threats, it’s vital that companies take strict measures to protect and monitor all financial data. This includes local and global data, so that companies can study their own financial data through a much wider lens.
It’s no surprise that financially unstable companies are at a higher risk of having their supply chain disrupted. But, it’s not just monetary risk that comes with financial hardship; it causes practical issues, too. Avetta warns that financially insecure companies are 5% to 15% more likely to have to deal with site incidents.
With each employee injury costing a company US$1,100 and each death $1.3m, that’s a major threat to a company that’s already struggling financially. Ensuring all workers are health and safety trained is, therefore, vital for the protection of the company’s finances, as well as employees themselves.
Financial risk can also be alleviated by paying careful attention to possible sanctions within the supply chain. Avetta states that, already in 2022, US companies have paid US$11.97m in fines for sanctions violations.
To avoid this, companies are urged to undertake in-depth research into governments and sanctions bodies, to gain more information about sanctions violations. Another measure would be to stop using any subcontractors that are at high-risk of sanctions violations, to prevent any association that could cause a potentially crippling fine.
Violations that get out of hand can even escalate into legal action. Not only are legal penalties enough to leave companies financially weak (if they do manage to survive at all), but they put the company at risk of losing face with all its consumers. Since a brand’s value is predominantly made up of its reputation (Avetta suggests 70% to 80%), legal action has the potential to be hugely destructive.
Due to the current economic crisis and increased attention to supply chain management on a global scale, it’s more important than ever that businesses take all possible measures to protect their data, finances and employees, thereby protecting the survival of their supply chain.
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