How Companies Can Manage Global Supply Chain Risks

March 15, 2022 3 minute read

Outgoing shipping container highlighting the need for global supply chain risk management

Global supply chains are the backbone of the business world.

Multinational companies rely on emerging markets to provide critical resources, labor, and new consumers. And while COVID-19 has exposed the weaknesses of these vast supply chains, it has also underscored the solution: a renewed commitment to supply chain risk management

Supply chain disruptions have always been a source of sleepless nights for supply chain managers, but now, they are a fact of life for all leaders.

Climate change, global pandemic, labor shortages, fluctuating demand, border conflicts, trade and tariff issues, and much more contribute to an ever-shifting global business landscape. Building a culture of supply chain risk management helps leaders anticipate these shifts and adapt or pivot more quickly, improving resilience in the face of uncertainty and adversity.

5 Steps to Better Manage Supply Chain Risk

Below are five steps you can implement for better supply chain risk management.

1. Map Your Risk at Every Level 

Companies with global value chains need to identify, assess, and track key sources of supply chain risk. These risks might relate to political or economic instability; supplier disruption; environmental impacts on the supply chain (or the supply chain’s impacts on the environment); climate change; forced labor and other labor risks; and other factors.

For your supply chain risk assessment, invite input from diverse stakeholders to help identify your risk exposure at different tiers, from different angles.

  • Who are all of your suppliers, vendors, and partners from raw materials through end-of-life logistics?
  • How do they help you and where are they located?
  • Do you have more than one supplier to cover each need?
  • Are these suppliers vulnerable to the same supply shocks and disruptions? 

Critical, here, are investments in supply chain transparency and due diligence, to shine light on parts of complex supply chains—and associated risks—that are often hidden.

2. Prioritize Risk Mitigation Projects

After mapping your supply chain risks, prioritize them so that you can focus on the risks with the highest potential to derail your operations. Score each risk based on its likelihood, its severity, the timescale, and your company’s ability—alone or through partnership—to do something about it.

A consistent scoring methodology will make it easier to prioritize action and direct your investments accordingly. Once you have confirmed the rankings and vetted the priority of each risk, you can start developing strategies and initiatives to shore up the vulnerabilities that are most likely to cause problems over the near- and long-term.

3. Collaborate with your Supplier Network, and Beyond

If you are relying on one vendor for key components or raw materials, your risk of a supply chain disruption is higher than if you have built relationships with reliable secondary suppliers and manufacturers.

Expanding your supplier network is a key strategy for reducing risk (and also an opportunity to build diverse new players and innovative solutions into your value chain).

Next, engage your suppliers as true partners in identifying and managing supply chain risks. By collaborating across your supply chain to improve economic, social, and environmental conditions, you improve its resiliency—and your company’s.

Strategic partnerships with your suppliers; cross-sector partnerships with international development actors; and pre-competitive collaboration with industry players with overlapping supply chains can help you better tackle key supply chain risks.

4. Review Supply Chain Risks Regularly

Your supply chain risk management plans are only as good as they are current. Set up a risk governance team and regular reviews to keep abreast of internal and external changes that affect your company’s risk exposure.

Build and tap partner networks—with your suppliers, technical experts, and key local stakeholders in target geographies—to better understand changing risk landscapes.

5. Build Risk Awareness into Company Culture

Supply chain shortages and bottlenecks related to the COVID-19 pandemic have made it clear that risk management is no longer the responsibility of supply chain managers alone. Instead, risk identification and mitigation need to be part of the company mindset. 

Another key shift is in how a company sees its investments in supply chain sustainability. Initiatives that were once almost exclusively the purview of the sustainability team are now recognized as core business investments for risk mitigation and a resilient supply chain.

Working Toward Enhanced Supply Chain Risk Management

Supply chain risks aren’t going anywhere. Fortunately, leaders can strengthen supply chain resilience by embracing proactive risk management strategies and seeking out strategic partners to mitigate risks before they become serious issues. 

At Resonance, we help global companies develop strategy and partnerships to tackle deep-seated and systemic issues and navigate supply chain risks in emerging markets. If you’re interested in learning more about how to build a resilient and sustainable supply chain, contact us.

Don’t Miss out

Subscribe to our latest insights

New call-to-action

Join the discussion

If you are a corporate leader and would like to be a part of a discussion about these and other issues in the presidential transition, contact Resonance Strategic Partnerships Manager, Seth Olson.