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Supplier and Contractor Risks

Supply Chain Risk Management is a key element of any business. It is critical in all industries that rely heavily on their supply base, not only to deliver a quality product or service on time and at a competitive cost, but to ensure that it is done without harm to individuals, the environment, or assets.

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Supplier relationship programmes allow organisations to work in collaboration with their suppliers, building trust and lasting cohesion. Implementing a standard risk based approach to tendering and supplier management, will help organisations mitigate and manage risks. Supplier management programmes will also improve fixed-capital efficiency, control working capital and provide an effective audit trail within a Supplier and Contract Management System, which will:

• Define strategies that turn risk into a competitive advantage

• Clearly identify methods on how you appoint and manage suppliers

• Determine when to conduct an intervention

• Improve competitive position in the market

• Build lasting relationships that work through recession and recovery

• Lower supplier costs

 

Operational Risks

In using the term ‘operations’ we refer not only to the everyday tasks that an organisation undertakes but also the less routine activities. It is important to pay attention to the operational risks that could impact on your organisation’s ability to deliver service on time and in full, at the highest quality and to the lowest reasonably practicable risk to your people and the environment.

 

Often, organisations overlook the barriers to achieving operational excellence, focusing on more obvious risks at the cost of dormant issues which may lead to loss in the future. By ignoring the hidden losses caused by operational inefficiencies, organisations expose themselves to huge risk, especially in challenging markets when competitors are likely to be looking for more efficient ways to operate.

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Undertaking an independent operational Gap Analysis can reveal many areas of weakness: bottlenecks, communication breakdowns and inefficiencies within an operation. Effective operational risk management is a cyclic process that forms part of the culture of an organisation, those that do operational risk management well (more likely to be learning organisations), go on to reap the benefits of their efforts.

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Business Process Risks

Process based risk management and compliance has never been more important to organisations than it is today. Transparency is essential to understanding and assuring compliance and organisations need to be clear on the what, who, why and when in relation to the controls of business risk in order to demonstrate operational excellence and retain corporate knowledge.

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Corporate knowledge is the fundamental back bone to any organisation and allowing it to leave the organisation with transient personnel haemorrhages investment in training and competence development and therefore increases risk exposure. Documenting and retaining corporate knowledge helps sustain business continuity and reduce disruption when key individuals leave the organisation.

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A structured total risk profile of a business, addressing the potential for business interruption, damage and loss of reputation is essential in order to identify and implement appropriate controls.

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Quality Risks

Quality Risk Management involves the evaluation of all risks to quality throughout an organisation. Quality Risk Management should be built into the core of a Quality Management System and can be undertaken by identifying the risk of defect, risk of customer dissatisfaction, risk of process variance or control risk of reliability failure.

If quality risks are well managed within an organisation, the benefits are obvious and include the following:

• Improved efficiency

• Reduced costs

• Early identification of risk

• Continual improvement

• Enhancement of reputation

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Risk management systems should reflect the scale and complexity of an organisation. Acting as a clear reference point to which employees and stakeholders can refer, this system must be flexible, unambiguous and open to constant evolution, to allow organisations to take calculated risks.