Supply chain risks shift with pandemic

by Inside Logistics Online Staff

Supply chain risks have shifted during the Covid-19 pandemic, with a dramatic rise in a number of threats. This is according to a new report by riskmethods, which details the top supply chain threats that affected organizations in 2019 and how they evolved during the first half of 2020 due to Covid-19.

There has been a major spike in the number of warnings regarding cyber security risk – a 1.8 times increase – pointing to the challenges organizations face with employees working from home in less secure environments. Labour practices and human rights risks have increased 1.7 times, and risks to key employees have jumped 1.5 times.

On the other hand, political situation risks have dropped by 50 percent and natural hazard risk also declined by 26 percent.

“At the beginning of the year, when we began compiling this report on risk, our risk intelligence told a very different story,” said Raimund Rix, chief product officer at riskmethods.

“But despite the upheaval and supply chain disruption companies face right now, we need to take the time to review and consider how the broader risk landscape changed, and how that affects our ability to recover and move forward. Organizations that continue to focus exclusively on pandemic risk open themselves up to additional vulnerability.

When analyzing how risk developed over the course of 2020, riskmethods data show a major increase in early warning signs of financial instability and distress of suppliers. This includes indicators such as disaster at a business partner site or location, ownership structure, revenue/growth outlook, major product delays and force majeure.

In fact, in May 2020, potential financial distress of suppliers accounted for more than 50 percent of all types of coronavirus-related risk. In addition, during the first five months of 2020, enterprises received nearly as many warnings of suppliers’ force majeure claims as in all of 2019.

“One thing the global pandemic has taught us is how quickly risk management priorities can change. This year we saw a massive shuffling of supply chains overnight,” said Heiko Schwarz, CRO and founder at riskmethods. “Despite the severity of the pandemic, procurement and supply chain professionals cannot afford to lose sight of other risk and warning signs in the market.”