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Businesses across the globe ‘complacent’ on supplier risks

Businesses across the globe ‘complacent’ on supplier risks

5 Aug 2015

Almost a third (29%) of businesses across the globe have admitted they are not confident that they are adequately managing the risks associated with their suppliers – with many lacking basic safeguards to maintain standards in the supply chain.

According to a market survey, more than one in 10 (16%) of supply chain professionals across the world do not use a standardised system to ‘pre-qualify’ suppliers – a method used to ‘weed out’ those who do not make the grade in business critical areas.

The issue is made worse because globally, a similar number (14%), of firms have admitted they do not carry out additional scrutiny of high risk firms, compared to low risk suppliers.

The market survey was commissioned by Achilles, a global supplier information company, and carried out by independent research consultancy IFF. Its team interviewed 300 supply chain professionals working at large construction, engineering, mining, power, utility, manufacturing and oil and gas firms across the UK, USA and Canada, Brazil, Spain and The Nordics.

Adrian Chamberlain, Chief Executive of Achilles said: “As supply chains become increasingly complex and globalised, we are seeing corporations operate like ‘global factories’ – sourcing components and labour from all corners of the world. This has led to increasing scrutiny of the social, ethical, environmental and financial credentials of all companies in the supply chain.

“We see this in the US, where the Sarbanes-Oxley legislation requires that public businesses reveal potential risks in their supply chain – out of a responsibility to protect consumers and shareholders. Yet this survey shows many firms would be unable to fulfil this. They could not identify which risks they’re exposed to, because they’re not consistently screening suppliers or carrying out proper due diligence on those deemed to be high risk.

“Any business that chooses not to carry out additional scrutiny on suppliers it knows are high risk is setting itself up to experiencing supplier risks – many of which could be prevented through carrying out proper due diligence.”

Adrian Chamberlain added: “In our experience, businesses can most effectively tackle risks associated with suppliers when they work collaboratively to apply common standards required of all contractors. In a network, businesses can share the administrative burden of collecting, managing and updating business critical information about suppliers. With accurate data, buying organisations can protect themselves by proactively managing and mitigating risk, and raising standards.”

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