IDENTIFYING AND MANAGING UNKNOWN BUSINESS RISKS THROUGH A SUPPLY CHAIN DUE DILIGENCE PROGRAMME
The 21st century has seen globalisation and outsourcing adoption manifest as a principal strategy for durable goods manufacturers to maximise profitability and reduce risk. The drivers of globalisation stem from basic principles of economics and trade focused on channelling lower costs and less regulated economies to produce the most highly regulated products. For durable goods manufacturers, the goal is to maximise profit within a highly connected and organised worldwide system that has extended into countless opportunities and established a diverse, interconnected and effective supply chain. Rational actors within this market quickly observed and employed the concept of outsourcing within their supply chains, to avoid paying higher wages for low-skill positions, and could profit from the relatively minimal internal effort and risks. These actors also saw an opportunity to outsource the highest risks within their business to these same suppliers.
The unforeseen consequence of outsourcing in your supply chain in a globalised market is the unknown risk to you and your business. Participating in globalisation and outsourcing for durable goods manufacturers has become second nature, allowing risk to emerge in predictable places. As a result, only avoidable risk has increasingly been scrutinised and targeted by enforcement authorities and legislation. These risks have evolved into a struggle, both internally and externally, for companies to understand and mitigate. The struggles internally include limited company capacity, lack of resources, and lack of data and technology. Conversely, companies now face increased risk in the supply chain due to a lack of control over suppliers, massive supplier counts and a global supply base with divergent ethics and norms. Historical situations of external risk exposure have not been pretty, from investor retreat to reputational damage, all impacting profitability. As the global market stage has expanded, so has the realisation that outsourcing often generates greater risk than insourcing.
Jan-Mar 2022 Issue
Assent Compliance