Supply chains pay little attention to the interconnection between risks

We all know that disruptions are occurring in rapid succession. But how all these disruptions are interlinked is often unclear. During Supply Chain Media’s Webinar Wednesday, Omera Khan and Nick Bailey from The Signal House argued for looking at the bigger picture, as in the case of the Strait of Hormuz. ‘‘What we’re good at is looking at each risk in isolation. That can give you a false sense of security.’’

These days, companies are anything but short of data. ‘‘On the contrary, they have far too much data, all of which demands analysis and generates more alerts than ever before. But more information does not always mean better decisions,’’ explains Omera Khan, co-founder of The Signal House. ‘‘Building resilience is therefore, first and foremost, a leadership issue. Discussions about resilience often centre on buffers and contingency plans. But what really matters is recognising when circumstances change, understanding what those changes mean, and assessing whether the current strategy still makes sense.’

We are all experiencing how circumstances are changing with increasing frequency. Khan also notes that there is growing interaction between the factors driving change, with the result that the scale of the risks is increasing. ‘‘What we’ve done in recent years is to treat each risk individually. And we’ve done that quite well. But where we’re less successful is in identifying how all those risks are interlinked. Take the closure of the Strait of Hormuz. That leads to higher energy prices and higher operating costs, which ultimately affects customer demand and economic growth.’’

This story was originally published by Supply Chain Movement. Read the full story at Supply Chain Movement →