Are your key suppliers on the edge of being shut down?

KNOWING HOW exposed they are to the consequences of malpractice, poor management, and financial loss helps you to build resilience in your supply chain and protects your business from disruption. For you, the priority is knowing where to look and what to look for.

Cyber security  

The increasing reliance on technology in the supply chain has made it more of a target for cyber criminals over the last two years - in fact in 2021, manufacturing was the industry most targeted by cyber criminals. 

Most of those attacks were phishing attacks which resulted in company data being encrypted and held to ransom - the net result of which is a node or nodes of the supply chain grinding to a halt while the data is encrypted. Last year, for example, Toyota halted production at 14 plants for 24 hours following an attack on one of its supplies Kojima industries.

The bottom line is that you should check your suppliers are working to a set of standards that mitigate risk, have a disaster recovery and contingency plan in place and hold a cyber attack insurance policy

Insufficient insurance

Supply chain disruptions are as constant as they are unpredictable. While the slew of large scale disruptions we’ve had since 2020 and the ensuing financial fallout could not have been predicted, it does not make the impact any less damaging - that's why it pays to have business continuity insurance and more importantly to check your suppliers have it too.

While traditional business interruption insurance protects you directly for any losses incurred, it doesn’t cover your suppliers or partners - and vice versa. However, business contingent insurance does, protect relevant parties from the financial impacts of one or more members of its supply chain suffering disruption.

On a more general level, under insurance, the practise of having inadequate or insufficient insurance can have damaging effects on your supply chain. It can prevent you or a supply chain partner from recovering to a position you were in before a loss, or even recovering at all.

Questionable health and safety

Unsafe working conditions have the capacity to disrupt or even halt your supply chain either through injury or death. They also have damaging - albeit slightly less serious - implications such as financial penalties and/or loss of reputation.

Mitigating this risk throughout your supply network is a matter of compliance on a number of levels. For example, companies that have achieved ISO9001 status, or those who are working towards it, have a clear commitment to raising standards in their workplace - which includes health and safety.  

Making sure that your supply chain partners work to the same rigorous health and safety standards as you should form part of the quality assurance policies they have in place. Safeguarding employees and contractors through better visibility into their working standards and practices not only helps to protect the workers themselves, but also goes some way to mitigating disruptions caused by healthy and safety breaches.

Prevention is always better than cure. Being aware of the potential for disruptions, closures and poor standards in your supply chain can help you to reduce their risk and make your organisation more resilient and agile in the process. 

To find out how you can identify risk in your supply chain, explore Alcumus’ Supply Chain Compliance solution.