Understanding Supply Chain Risks
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The right supply chain can increase efficiencies, decrease costs and optimize your business processes. However, there could be many hidden risks in your supply chain that you may not be aware of.

The challenge is identifying what you don’t know, says Alexandra Wrage, president of TRACE International, a global organization that provides practical, cost-effective anti-bribery compliance solutions for multinational companies.

“Most third parties are good, reputable individuals or companies hoping to be valued partners,” she says. “But embedded in this community are entities on international watch lists, entities disguising their businesses with sanctioned countries and entities that use bribery as a marketing strategy.”

Businesses should conduct due diligence into a supply chain relationship from the onset to avoid future finger-pointing and compliance issues.

“The greatest problem we see is letting this issue go too long and then scrambling to get visibility into supply chains after a problem arises,” Wrage says. “At that point, business continuity is compromised, tensions are high and deadlines are tight.”

She says that CEOs should be aware that a failure to invest in compliance is almost always far more expensive in the long run.

“The costs of investigation, lost business, loss of reputation and fines and other penalties far outweigh the cost of the effort required to prevent most problems,” she says.

Natural disasters also pose a risk to supply chains. Many businesses receive materials today to make their product tomorrow, so when a disaster strikes, these businesses are greatly impacted. For example, the 2011 Japanese earthquake and tsunami caused many U.S. businesses to halt production due to delayed shipments of items such as computer and auto parts.

While you can’t prevent a natural disaster, you can position yourself so that a natural disaster doesn’t cripple your business’s production. Evaluate your supply chain to see where you could be potentially affected, determine the materials that are critical to your operations, keep as much of a reserve supply as possible and look into alternative supply sources.

Another risk to your supply chain risk is potentially compromised data. In a supply chain, data is shared with many entities, creating a greater security threat. Discuss data protection practices with your suppliers and only share necessary information.

There are many risks in your supply chain that can jeopardize your business. Be sure to examine all aspects of your chain to make sure your business is not overly vulnerable to an interruption.

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This information is general in nature and is provided for educational purposes only. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. Information provided should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Regions encourages you to consult a professional for advice applicable to your specific situation.