Managing supply chain risk

Managing supply chain risk

One area where the retail industry expects to see substantial changes over the next few years is in the structure and operation of supply chains.  Our article in collaboration with Retail Week (available here) gives more detail on these expected changes, but while change is exciting, it is also important that businesses understand and address the new risks introduced.

Supply chain risks

  1. Data security

Consumer and retail businesses are gathering ever-increasing volumes of data on their customers.  However, with this increased data collection comes the increased risk of a serious data incident, particularly in complex supply chains where your business is sometimes only as strong as the weakest link in its chain.  It is therefore vital that all organisations in supply chains understand and comply with their respective roles and responsibilities in relation to data protection and security.  This issue will only become more significant with the introduction of the General Data Protection Regulation in May 2018, with more stringent rules and the potential for enlarged fines.

  1. Fraud

Supply chain fraud is not a new issue.  However, the move towards more collaborative supply chains, with more involvement from an increased number of parties, increases the risk of fraud without detection.  Businesses need to be aware that fraud can take many forms, including misappropriation of goods and intellectual property, false accounting, and corruption.  It is therefore also important that businesses are aware of the key risk areas to their supply chain, and take steps to address these accordingly.

  1. Reputational issues

In the age of social media, corporate reputations can be hit devastatingly quickly in the event of a major adverse incident.  Particular reputational risks for retail supply chains (in addition to those mentioned above) include health and safety, bribery and corruption, and also modern slavery.  While these issues are already regulated, which means that most businesses should have policies and procedures in place to address them, supply chains present complex risks which must be carefully considered. As with all of the risks identified in this blog, reputational risks will be influenced in particular by the jurisdictions that the supply chain members operate in, so a geographical assessment should form a central part of any risk analysis exercise.

How to address the risks

 First, your business needs to conduct a risk assessment and appropriate due diligence on its supply chain.  Who are the parties in the chain, and what are the risks and weaknesses?  Then look at how those risks can be addressed.  A key route is through robust contractual measures which allocate risk and responsibility on key issues such as data protection and security, confidentiality, intellectual property, anti-bribery and modern slavery.  This must then be supported by appropriate measures such as policies, procedures, and training of key people.  Osborne Clarke can help with these measures.  We also run simulated crises so your business can test its responses, identify any weak spots, and be prepared to act quickly and effectively in the event of a serious issue arising in its supply chain.

Sign up to our newsletter

Meet our experts