GOVERNANCE
Risk management of suppliers has declined in the last six years Companies reporting effective risk management is in place with more than 75% of critical suppliers (2014 to 2019)
an equally worrying picture: respondents have done little to improve the risk management of their most important suppliers. In fact, our data shows it has declined in the last six years. In 2019, financial services is the industry sector most likely to have effective contract and performance management in place: almost 60% report good practice implemented with more than 75% of critical suppliers, significantly higher than other sectors. sectors perform: half of the firms in the sector have effective contract and performance management in place for less than one in four critical suppliers behind both IT and telecoms and FMCG. However, the figure would probably be different if only direct suppliers to automotive and manufacturing companies were reported. Less surprising is that financial services also leads the way on risk management. It is surprising how poorly the manufacturing and automotive
of their relationship with key suppliers not only represents risk to the business but also undermines the case for SRM with internal stakeholders. Effective risk management Organisations can only say they have effective risk management in place if a comprehensive risk assessment has taken place and is documented, typically covering all aspects of risk related to the provision of the supplier’s product or service. It should include risk and impact of failure, financial stability, supply continuity, and reputational risk. A single risk register should be maintained and reviewed on a regular basis. Business continuity plans (BCPs) and exit plans should be put in place. Alongside contract and performance management, risk also represents part of the good practice foundation that SRM needs to be built on. Analysis of feedback over the last six years reveals
2014
42%
2015
22%
2016
40%
2017
34%
2018
26%
2019
27%
46
STATE OF FLUX
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