Regardless of what industry you operate in, the last two years have caused unprecedented disruption to business life as you knew it. While COVID-19 is largely to blame for the global-scale supply chain interruptions, a spotlight has been shone on the ever-present (yet sometimes unpredictable) business risks that exist across the entire supply chain.
Supply chain risk management has never been more important; many organisations are now focused on putting contingencies in place to manage the financial burden when disaster strikes.
Read on to gain a better understanding of the supply chain risk that could be threatening your business and how Barrack Broking can help lessen the burden.
What’s to blame for supply chain disruption?
The global pandemic is undeniably to blame for the upheaval to supply chains around the world. In Australia, the global impact continues to hit our shores despite COVID-19 cases dropping, and are expected to continue until the beginning of 2024.
Limited flights coming into our country, as well as restricted freight space on our ships and in shipping containers (on top of the high price of shipping), is seriously hurting retailers, who have reported that their supply chain costs have increased sevenfold, and ordering times from abroad have tripled.
The recent natural disasters in Queensland and New South Wales have also acutely reminded the nation of the potential risk factors to supply chains that wash away more than just financial resources. Not to mention, global conflict in Russia and Ukraine is affecting our supply of raw materials.
Compounding the supply chain disruptions above has been a shortage of workers in many industries. The pandemic not only causes absence from businesses due to personal illness, but has also shifted the focus of many Australians to their family, with a strong demand now for ‘work from home’ formats, families relocating, or people simply stepping out of the workforce to start or raise families.
For manufacturers, the worker shortage is one of the major manufacturing risks that is affecting supply chain operations.
What supply chain issues mean for businesses
The chances are that if you’re running an Aussie business, you’ve felt the pinch of what supply chain issues mean for businesses.
Whether it’s reduced sales, an inability to provide services, delayed product launches or staff lay-offs, the major impact has been on the bottom line of businesses. The cash flow impacts are often felt months (and sometimes years) after a risk event happens, which can leave your business’s future in question.
The uncertainty that the last few years have brought with it also translates into uncertainty around how to manage risks in businesses moving forward. We cannot control risks, particularly risks like a natural disaster, but there are ways to help protect yourself and your life’s work.
How to manage your supply chain risks
While businesses know that they cannot control certain supply risks, there is some comfort in knowing that they can manage them. The basic principles of risk management include risk identification, quantifying the risk, risk mitigation, and then finally transferring the risk.
Holding supply chain visibility over the continually evolving risks in complex supply chains can be tricky.
Internal supply chain risks
Supply chain risk can be separated into internal and external risks. An internal supply chain risk is one that is caused by internal business factors, such as changes to management, key personnel, or your internal operations and business processes.
External supply chain risks
As we detailed above, external risk factors can be environmental, social or economic. Even damage to a supplier’s physical facility can seriously impact the flow of products such as raw materials. Demand risks, such as what we’ve seen thanks to a shift in how consumers spend their money after COVID, are also an external risk faced by many Australian organisations.
Supply chain risk management
Supply chain management is a complex and sophisticated process, and building a risk-aware culture is vital to laying the foundation for risk management. Looking at diversifying your supply network, bolstering supplier relationships and locking in key suppliers are just some of the ways that you can start to better position yourself for effective supply chain risk management.
Engage experienced risk consultants
At Barrack Broking, we seek to understand exactly what you need to secure your business continuity. The chances are that your business risk profile will have rapidly changed with the recent changes and disruptions, which is why we provide insurance risk profiling and organisational risk management reviews and benchmarking.
To effectively mitigate risks, you need a proper risk assessment. As experienced insurance brokers, we not only help in assessing your potential risks, but we work with you long term to offer practical solutions to protect your business now and in the future.
Your contingency plans for supply chain risk management should start with a call to our Brisbane or Sydney offices — we are here to help.