Risk management is becoming a greater logistical challenge as businesses tie into more complex supply chains which expose them to third-party risks, according to a new report by the Economist Intelligence Unit (EIU). Two-thirds of executives surveyed also say that adverse supplier-related events are becoming more frequent and severe.
Strategies for managing customer and supplier risks, sponsored by Dun & Bradstreet, surveyed nearly 400 business executives around the world and sheds light on the extent to which companies are protecting themselves against risks posed by their customers and suppliers.
It shows that an increasing number of global companies are adopting enterprise risk management (ERM) frameworks and other comprehensive risk-management procedures that encompass customer and supplier risk.
Companies that track customer risk-management outcomes (about half of respondents) report substantially better performance – with nearly 90% saying they manage customer risks successfully, compared to 54% of organisations that don’t track outcomes (and 85% to 51% for supplier-related risks).
The report sets out four classifications of distinct risk-management strategies that emerged from the survey results, with the top performers in each category using advanced data analytics.
Companies employing comprehensive strategies increasingly look to “big data”, with around 70% of those practising ERM saying they employ third-party databases or predictive analytics – or both. However, in this category half of the respondents say that managerial judgments still play an important role.
Data analytics, the report concludes, can also help businesses overcome challenges of conducting effective assessments and avoid offending prospective customers, as well as consolidating risk management through global supply chains in a complicated environment.