Below, I present some interesting insights gained from a survey of finance professionals.
NUMBER ONE REVENUE THREAT: SUPPLY CHAIN DISRUPTIONS – Anonymous
Among the lessons companies learned from the disastrous hurricane seasons of the past two years along the Gulf
Few businesses are immune to supply-chain shocks. Even organizations remote
from natural disasters may find their supply lines–already pulled taut by
global sourcing, supplier consolidation and just-in-time initiatives–stretched
to the breaking point.
The growing threat of supply-chain disruptions is a
top-of-mind concern for many business leaders, according to a Harris
Interactive survey commissioned by Johnston, R.I.-based FM Global, a commercial
and industrial property insurer. The survey polled some 600 finance executives
in large organizations around the world. When asked to identify the top risk
that affected their company’s primary revenue driver, 25 percent of respondents
from North American companies and 19 percent of those based overseas–the
largest proportion in both cases–chose supply-chain exposures.
attacks and recent corporate accounting scandals, particularly in the
only 5 percent of North America-based respondents chose terrorism or sabotage
as the top risk, and just 4 percent of that group selected management or
employee malfeasance. The survey identified regulatory issues and increasing
competition as the most important emerging risks for North American companies.
Organizations in the North American group allocate 56
percent of their risk management budget to loss prevention and control and 44
percent to risk transfer. Among overseas companies, the ratio is similar, at
58-42.
"With globalization and outsourcing stretching the
supply chain and introducing new and never-before-anticipated business
challenges, the findings suggest many companies may want to ensure they are
doing all they can to deter a disruption of any kind," says Ruud Bosman,
executive vice president with FM Global. "At the same time, it’s
encouraging to see so many companies focusing on risk control rather than
simply buying insurance to cover losses. The most progressive financial
executives do not wait for a disruption to their businesses to demonstrate the
value of investing in risk quality."
Bosman adds, "Companies that manage their risks
properly and communicate the effectiveness of such efforts to their many
stakeholders will find they not only gain a competitive advantage, but also
boost financial performance, enhance shareholder confidence and help protect
the value their businesses create."
Top 10 Threats to North American Companies’ Primary Revenue Driver
Supply chain problems 25%
Mechanical/electrical breakdown 12%
Natural disasters 8%
Labor issues 8%
Fire/explosion 6%
Pricing fluctuations 6%
Terrorism/sabotage 5%
Regulatory issues 5%
IT/Telecom-related risks 5%
Management/employee malfeasance 4%
Source: Anonymous. 2005. “Number-one Revenue Threat: Supply Chain
Disruptions.” Business Finance Dec 2005.