Companies Crack Down on Risky Suppliers

Aug. 11, 2009
A majority of companies have instituted regular communication and audit policies with suppliers.

Nearly three-quarters (74%) of businesses are taking a hands on approach to managing supply chain risks, according to the 2009 Risk in 21st Century Supply Chains survey, conducted by global risk adviser Aon and strategic business partner State of Flux.

The survey found that harsher economic conditions has led to more stringent assessment of the risks in companies supply chains and business continuity plans should the worst occur. This move to safeguard businesses is being spurred on by the threats of increasing insolvency and the impact the H1N1 virus could have on producing and delivering goods.

Key findings of the study include:

  • More than half (53%) of firms have instituted regular communication and audit policies with suppliers.
  • Some 15% more companies are actively managing the risks around contracts to ensure they are covered from the negotiation phase through spelling out quality controls and contingencies.
  • There has been a 20% increase in the number of companies investigating their suppliers suppliers to assess the strength of the supply chain.
  • Although insurance is still a vital element of risk management, there has been a dramatic 20% fall in the number of companies using it as the only form of mitigating risks.
  • One in ten firms have placed an emphasis on evaluating the ethical issues they are being exposed to by their suppliers.

"Such uncertainty in the global economy and a greater demand for corporate accountability has meant companies are taking a far more proactive approach to managing their supply chain. The good news is that the issue of supply chain risks has been taken on board by procurement and embedded in their performance management and audit processe," said Grant Foster, head of enterprise risk management at Aon.

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