Data is the key to exposing risk in supply chain - Alcumus

The world is experiencing turbulent times. The impact of the COVID-19 pandemic, climate change and the conflict in Ukraine have put the global economy under severe strain. Global supply chains are feeling the tension and it’s predicted to remain difficult for the rest of 2022 and beyond.

While these challenges cause huge difficulties in the short term, they can also be seen as a catalyst for change. Through adversity there is an opportunity to take a step back and reassess how organizations can best protect themselves in the future from similar challenges that are bound to occur.

Now, there is a unique opportunity for businesses to embrace real change, incorporating more-stringent processes and building greater resilience, ensuring future storms can be weathered more effectively. This will not only benefit the global economy but wider society too.

Why supply chain resilience is vital

The past few years have highlighted the weaknesses that exist in the global economy. Supply chain frailties, inflexible approaches, disenfranchised populations to name just a few. Failing to seize the moment and consider alternatives could be fatal for businesses. The dangers include:

• Increased operational risks and liabilities
• Rising costs
• Resource shortages
• Financial difficulties
• Damage to brand and reputation
• Setting a new course

Organizations need to be flexible and react quickly to any disruptions. They also need to have an eye on the long-term, looking to the future, considering how best they can protect themselves, their environment and the societies they operate within.

To be more resilient, focus on change,

This is the first in a series of blog posts exploring what is fuelling the need for organizations to be more resilient, flexible and agile. It will look at the following topics:

• Disruption to supply chains

• Risk management for third parties

• Creating a safety culture 

• Exposing risk through full data visibility

Disruption to supply chains

Even before the pandemic, concern was increasing around the vulnerability of supply chains. The disruption of the past two years has brought that into sharp focus.

While a global economy has many benefits, including greater choice and value, these don’t come without a cost. With so many organizations relying on products and materials which need to be transported from across the globe, there are a host of risks surrounding supply chains, some of which can be controlled and some which cannot.

Recent events have pushed supply chains to near collapse, putting a huge amount of pressure on businesses to find alternatives quickly to maintain performance.

Issues around transportation, labor shortages, natural disasters and conflict have all highlighted how important it is for organizations to build resilience into their supply chains and explore how best they can mitigate risk.

Research shows the more proactive businesses can be in this area, the better. Our comprehensive study from 2021 with 450 medium and large UK businesses¹, revealed: 

• More than three quarters of businesses have been negatively affected by supply chain issues

• 40% of organizations have found verifying their supply chain credentials has become harder over the past two years. 

In the past, supply chain risk management has concentrated on logistical delays or the financial security of suppliers. Now it is clear that the scope must widen to incorporate larger, global issues like climate change, societal changes and geopolitical disturbances.

Risk management for third parties

A typical organisation works with a wide range of suppliers and contractors, which need close and careful management. The actions of these partners matter, and they need to work to strict standards to mitigate risk and prevent any reputational damage. Organizations need to improve the pre-qualification and verification processes across the supply chain, which is neither simple nor straightforward. 

Factors such as health and safety, ethical standards, cyber security and financial management all need to be monitored within third parties to build resilience and sustainability. Problems in these areas can have a severe impact on both revenue and reputation.

The Alcumus Benchmarking Contractor Management survey conducted in 2020², showed: 

• Every single respondent believed health and safety compliance assessments were important for suppliers.

• 88% also believed ethical and sustainable compliance was important. This increased to 92% during the first lockdown. 

Businesses need to have evidence from the suppliers and contractors they work with to show they meet the required regulatory standards and that they adhere to the same safety, sustainability and ethical values. Failing to demonstrate this, leaves organizations open to potentially huge risks. Working with those that don’t live up to the required standards could be extremely costly.

The factors to consider are:

 • Do you have complete visibility of everyone in the supply chain? 

• Do they meet the relevant regulatory and legal requirements, or meet best practices? 

• Is the health and safety of contractors and suppliers reviewed regularly? 

• Do you have measures in place to review regularly the operational, financial and ethical practices of those third parties? 

Effective third-party risk management needs to involve a much clearer overview of contractors and suppliers. By ensuring they work to the highest safety and ethical standards, much greater resilience can be built into their relationships.

Creating a safety culture 

Workplace health and safety has risen up the agenda in the past two years for both employers and employees. Getting this wrong can have dire consequences. Providing a safe workplace goes far beyond any legal obligation. It is about treating employees with respect and valuing their wellbeing.

The Health and Safety Executive (HSE) released its annual statistics on work-related health and safety in Great Britain in December 2021. The 2020/2021 figures for the UK show: 

• 1.7 million working people were affected by ill health 

• 441,000 workers were injured and there were 142 fatalities 

In the USA, figures are recorded by the US Bureau of Labor Statistics³. These highlight 

• More people were killed at work in 2019 than in any year since 2007 

• Every 99 minutes a work-related incident causes a fatality 

What should a robust health and safety management include? 

• Senior leadership committed to making it happen 

• Businesses following through with actions not just words

• Employees listened to and valued

• Employees feel empowered to enforce standards and highlight shortfalls

 • Regular investment in the required policies, processes and equipment 

Good health and safety is not just the right thing to do morally, research shows that workers are more productive in workplaces that are committed to health and safety⁴. It will also help to reduce absences, reduce downtime caused by illness and accidents and limit disruptions. 

Exposing risk through full data visibility

In the modern workplace there is no substitute for trusted, accurate data. Without it, it’s impossible to deal with the fast pace of change and keep up with competitors.

Technology has the power to help the move to greater resilience happen more quickly. Having access to all the data you need makes it easier to review, analyse and make accurate and timely decisions.

Technology also has the power to create connections, bring teams together and aid with greater collaboration.

Great data visibility provides business and senior leaders with a complete view, enabling them to assess risk accurately and take decisive, positive action to drive change.

Full data visibility has crucial business benefits, such as:

 •Ensuring compliance with required regulations and obligations 

• Better, more accurate decision-making 

• Ability to show due diligence 

• Supporting a culture focused on sustainability 

• Reducing costs

• Supporting better quality 

• Enhancing employer brand to reassure clients and attract new talent 

• Supporting better health and safety and employee wellbeing

• Emphasis on continual monitoring and improvement 

• Less administration required

Now is the time for business to pause and reset, focusing on improving their digital capabilities with the aim to improve both the effectiveness and efficiency of their operation. This will not only benefit their own business to improve supply chain visibility, creating greater resilience and ensuring an agile, speedy response to future disruption.

These are the issues that are not just relevant now, they will help shape the future of how and where people work and how businesses around the world operate. They will not be solved if handled in isolation. A holistic approach, using the latest technology, is vital to adopt a better, fair business model.

Download Alcumus' latest eBook: Building Resilience in a New Global Economy, to strengthen your contractor network and safety culture.

About Alcumus 

Alcumus is a global-leading provider of technology-led risk management solutions providing clients with advice, expertise and support to help them identify and mitigate risks, navigate compliance and keep people safe. It supports clients with a wide range of risk management solutions, including Supply Chain Compliance, EHS Software, Certification and Asset Inspection.

SOURCES

1. Alcumus Supply Chain Compliance and Resilience Research, December 2021 of 450 medium and large UK businesses 

2. Research commissioned with the Safety and Health Practitioner of Environment, Health and Safety (EHS) managers across UK businesses, March and May 2020 

3. Bureau of Labor Statistics US Department of Labor, News Release, Dec. 2020

4. The Impact of Health and Safety Management, iosh and Loughborogh University, 2021