Supply chain disruption prompts risk rethink

Only a minority of chief executives are very confident that their current risk-management strategies will prove effective against supply chain events such as the Japanese tsunami, a new report has warned.

PriceWaterhouseCooper’s Private Company Trendsetter Barometer reports that what it defines as trendsetter companies revisiting their risk strategy are the ones most intent on growth over the next 12 months. It notes that 76% are planning to increase operational spending. More than half (52%) also plan to make major capital investments.The need to revisit risk strategy was also cited by a greater percentage of these trendsetter companies that sell abroad (39%), compared with domestic-only companies (21%). International companies are also more alert to the threat and potential effects of low-probability, high-impact events such as the Japanese tsunami last year (so-called "black swans").

Regardless of their size or where they operate, private companies are not insulated from large-scale events that happen halfway across the globe," said Ken Esch, a partner in PwC’s Private Company Services practice. While international companies are naturally more alert to the fallout from such events, they need to make sure they couple that awareness with sound methods of dealing with their risk exposure. As it stands, the post-2008 adjustments private companies made to their risk-management and resiliency programmes don’t seem likely to suffice in today’s increasingly volatile world.

Companies recognise that it’s also an increasingly competitive world, where taking on risk is part and parcel of pursuing growth through innovation and expansion. The key is to integrate risk considerations across the company as strategy-setting takes place. Treating risk as an afterthought is no longer a tenable approach.