With heightened market disruptions posing ever-greater threats to supply chains, only 21% of supply chain risk managers report having a highly adaptable network with strong visibility. Are you one of the 21%? Do you have the agility and transparency you need to respond to threats within your vendor portfolio? To know for sure, you’ll have to dig deep to find all the risks that may jeopardize your organization.

Identify Risks Hiding in Your Supply Chain

Some supply chain-related risks are obvious, but others can be more subtle and underacknowledged. You can only strengthen your supply chain risk management strategy if you get a clear view of all the risks that could threaten you, especially those that are concealed. Here are five places to look:

IT Security

A cyberattack on one of your suppliers is potentially more dangerous to your organization than a direct attack on internal systems. Threats from suppliers’ systems are often overlooked, and you have less direct control over security and mitigation than with your organization’s own systems. If your supplier has access to your internal systems — or sensitive customer data — the resulting impact could include regulatory fines, legal repercussions, and reputational damage. According to a recent Soha Systems survey, 63% of all data breaches link to third parties that have access to their business systems. Moreover, IT security threats come from your direct suppliers and their suppliers, extending all the way down to the raw materials.

Vendor Financial Health

Vendors who go bankrupt not only stop supplying you, but they also stop honoring items like warranties, services, and other ancillaries which you may depend on. The repercussions of unstable suppliers can ripple throughout your entire operation, affecting productivity and profitability. For example, in 2017 — when Japanese car part maker Takada filed for bankruptcy due to lawsuits over faulty airbags — many auto manufacturers suffered. Not only were their supplies cut off, but the bankruptcy affected warranties, services, and liability for recall costs.

ESG Commitment

Aligning with suppliers who commit to sustainability and ethics is not just good practice — depending on your jurisdiction, it’s becoming a requirement. Regulatory measures like the Carbon Emissions Act, UFLPA, and the German Supply Chain Act necessitate new kinds of supply chain reporting, with noncompliance leading to significant fines.

Burnout

Third-party burnout is just as important as burnout within your own organization. Overworked employees make mistakes, leading to quality issues and missed deliveries. What’s more, ethical concerns arising from third-party labor practices can also lead to negative publicity and a loss of consumer trust.

Geopolitical Events

Shifts in international relations, sudden political instability, or trade disputes can stop your supply chain as suddenly as a brick wall. You must keep aware of political developments in your supply ecosystem to give yourself the necessary lead time to remain agile to sudden changes. Take, for example, the 2022 Russian invasion of Ukraine, the repercussions of which rippled into international supply chains. Before the attacks, the EU — which is the world’s largest importer of natural gas — sourced its largest share of its natural gas from Russia. Political relations required a quick pivot away from this supplier, and it impacted gas prices and caused significant hardship for the people of the EU.

Decide How You Approach Volatility

As the world becomes more interconnected and interdependent, certain kinds of supply chain disruptions will not only increase over time but they will also become more impactful. For example, experts predict that climate-related supply impacts will become more severe. In addition, disruptions like port and shipping delays that used to be considered minor annoyances now produce cascading effects as we depend increasingly on just-in-time shipping. Some organizations make themselves particularly fragile to volatility by trying to overcontrol or become over-efficient. Too much expense-cutting in the supply chain, for example, can expose an organization to dangerous single points of failure. Successful organizations position themselves to embrace volatility as a healthy challenge and potential learning experience. Building redundancies in your supply chain, maintaining open communication with vendors, and diversifying your supplier base can help your organization avoid delays, financial losses, and legal issues stemming from increasingly impactful supply chain volatility. For more information on positioning to deal with volatility, download Riskonnect’s whitepaper, The Hunt for Hidden Risks.

Take Advantage of Risk Technology

Embracing data-driven solutions will revolutionize your supply chain risk management process. The right technology provides real-time visibility, enabling you to anticipate and address potential disruptions. This isn’t just a safety net — it’s a strategic advantage you can’t afford to ignore. Third-party risk and ESG technology offer a comprehensive view of your supply chain risks, so you can spot trends and gain insights. By leveraging data, you can minimize the ripple effect of volatility. This allows you to react more swiftly to potential risks and protect the integrity of your supply chain. Additionally, technology simplifies data collection so you can allocate your time more efficiently towards identifying potential issues. This approach allows you to respond quickly to challenges, reduces downtime, and enhances your overall supply chain risk management processes.

For more on strengthening your supply chain risk management, download our ebook, The Hunt for Hidden Risks, and check out Riskonnect’s ESG software solution.