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SPOTLIGHT on

AbLA G_EJ O L E N X

Bringing Rigor to Risk Management
Risk management takes on a challenging new dimension in today's extended supply chains. Meeting that challenge hegins with a rohust planning process.
By Kish Khemani Risk management is emerging as a key Focus area lor corporations, especially in terms ol the extended supply chain. Traditionally, commodity-price liuetuations and supply disruption have been the two top-ol-mind risk concerns lor supply management people. But as they take on expanded responsibilities For global sourcing, these proFessionals are also increasingly required to manage risk in terms oF brand, reputation, and ethical sourcing. Recent corporate history sbows a number oF instances in wbicb companies bave suFFered heavy losses because tbey Failed to manage global risk eFlectively. For example, Sony recently lost more tban $420 million From ibe recall oF millions oF lithiumion battery packs tbat it manulactured or assembled in Cbina and sold For use in computer equipment by companies like Dell, Apple, and Tosbiba. Wbile awareness oF tbe need For risk management continues to rise. Few companies Feel eonlident in tbeir ability to work it into tbe corporate skill set, especially wben il comes to monitoring risks. Yet as companies look to expand tbeir global Footprint, supply risk is emerging as a concern For tbe entire executive suite, not just tbe procurement or supply management cbiel. lacturing, For example, companies expose tbemselves to tbe potential tbelt oF tbeir trade secrets. And wbile just-in-time manuFacturing and streamlined orderFulFillment tecbniqiies may reduce inventory, tbey also multiply tbe negative consec|uences oF supply cbain disruptions. Acquisitions introduce complexity by bringing on new suppliers tbat were selected tbrougb unknown evaluation criteria as well as new assets tbat introduce risk. Supply consolidation, anotber proven eFFiciency, can create cboke points or bottlenecks in tbe supply