A Supply Chain Risk Framework for the Crises of Tomorrow

By Erika Peters, Exiger Global Head of Third-Party & Supply Chain Risk Management

Erika shared the insights below during an Exiger expert session at Gartner Supply Chain Symposium/Xpo™ 2022.

Supply Chain Risk is Varied and Complex

It can’t be overstated—global supply chains are experiencing unprecedented challenges from a combination of complex issues:

• Pandemic bottleneck effects are still being felt, like the semiconductors that remain in short supply with experts predicting the chip shortage will continue through 2024.
• Local weather conditions create an international ripple effect, like the Texas winter storm last year that ground multiple chemical plants to a halt and triggered a global plastics shortage.
• The Russian invasion of Ukraine has created a shortage of raw materials and need to comply with new sanctions against Russia.  
• An overreliance on foreign production of goods, especially Chinese supply chains.  
• Increasing regulatory complexity, such as the Uyghur Forced Labor Prevention Act.  

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The governments and organizations operating in this challenging and rapidly evolving threat landscape need a new approach to supply chain risk management. Resilience and integrity must be key ingredients as we restructure supply chains to withstand current conditions and prepare for the future.  

The Exiger TRADES Supply Chain Risk Management Framework

Exiger developed the proprietary TRADES risk management framework as an actionable blueprint for building a third-party and supply chain risk management program to stay ahead of current and upcoming threats and vulnerabilities. The framework helps governments and companies baseline their current risk management maturity stage, and work to develop a predictive rather than reactive risk management model.

Here is an overview of risk landscape view considerations:

Supply Chain Macro Risks	Supply Chain Operational Risks	Supply Chain Micro Risks
·      Foreign Influence ·      Environmental   Disruption ·      Geo-Political/ Regulatory ·      Economic	·      Product Quality & Design ·      Manufacturing & Supply ·      Transport & Distribution	·      Financial ·      Compliance/Regulatory ·      Technology/ Cybersecurity ·      Human Capital

While COVID-19 upended every company’s supply chains and operational plans last year, geopolitical risks — regional trade policy, instability, corruption — represent an organization’s biggest concern.

The TRADES risk management framework is designed to address those concerns, and includes six distinct steps:

• T – Transparency of Current State
• R – Risk Methodology Design
• A –  Assess Current Risks
• D – Determine Mitigations
• E –  Evaluate Framework Uplift
• S – Supplier Monitoring

How Mature is Your Organization’s Risk Management?

We encourage you to find your starting point in the TRADES risk management maturity model by identifying the stage that most closely matches your organization:

STAGE 4: Anticipatory/ Predictive Posture	Predictive models and a dynamic TRADES framework  Criticality monitoring of critical sources of supply  High risk disruption events modeled for each critical region (e.g., climate/weather events, pandemic/public health event, political unrest events, etc.) and impact assessed  Alternative sources of supply identified to minimize disruption and migration plans developed
STAGE 3: Proactive Posture	Risk appetite known, established RACI governance and continuous program improvement model  Sub-tier supplier ecosystem risk effectively mitigated, integrity restored, continuous monitoring activated to ensure resiliency  Micro-level entity risk across the entire supplier ecosystem is identified through continuous monitoring and mitigated in real-time
STAGE 2: Progressive Posture	Established strategy and governance  Tier 1 supplied ecosystem risk effectively mitigated, integrity restored, continuous monitoring activated to ensure resiliency  Sub-tier supplier ecosystem illuminated, and associated risk known and mitigation plans developed for high-risk entities within sub-tier supplier ecosystem
STAGE 1: Awakened Posture	Risk owners and risk types known  Tier 1 supplier ecosystem illuminated, and associated risk known  Criticality assessment conducted, critical sources of supply identified and geographically mapped  Mitigation plans developed for high-risk entities within Tier 1 supplier ecosystem
STAGE 0:  Reactive  Posture	Fragmented program, with lack of strategy, governance, risk owners and risk types  Largely unaware of supplier ecosystem or associated risk  Risk identification is ad hoc/episodic and typically in response to significant disruption that has occurred

For more information, download your complimentary copy of the TRADES third-party and supply chain risk management framework or assess your organization’s risk maturity today.

Based on our conversations with leading supply chain risk management professionals, we see forward-thinking companies pursuing a range of actions and investments to mitigate the impacts of future disruptions. In 2022, the key areas of investment are:

• Skilled team members
• Technology
• Integrating risk views into one
• Supply chain risk solutions
• Central golden data source
• Vendor & supply chain due diligence

Technology is key to managing third-party and supply risk management. Exiger clients mitigate critical threats to their supply chain and entire supplier ecosystem with Supply Chain Explorer, our platform offering supply chain risk insight in a single click.