Rising Tides: Don’t Let Your Business Sink

As the first drops of the so-called St Jude’s storm struck swathes of Western Europe in late October 2013, the chances are that even the most visionary CEOs failed to predict the business impact that Britain’s wettest winter would wreak.

Because just as water exposes the quickest, weakest paths – leaving a significant human cost – so too did the floods uncover those businesses and processes with supply chain vulnerabilities. Given that the flooding of 2012 cost the UK economy £600 million, with a direct cost to businesses of £200 million, even gloomier figures are forecast from the latest bout. With almost 200,000 businesses across the UK at risk of flooding, supply chain security has stepped into the spotlight.

And given the complex and interconnected nature of many modern supply chains, the same can be said for businesses across the globe. Take, for instance, the March 2011 Japanese earthquake and tsunami, estimated to have resulted in a loss of four million vehicles in the automotive industry, with 90% of those from Japanese manufacturers. Crucially, manufacturers from across the world were impacted by the resulting shortage in Xirallic paint pigments, which were previously only manufactured in the earthquake zone. Had anyone identified this potential supply chain vulnerability prior to the quake? These incidents not only show the increasing risk from extreme weather, but also the importance of supply chain security, management and assurance. Prudent CEOs, boards, and risk and security professionals are now realising the value of proactively engaging with their key suppliers.

Weak spots are identified, incident information is shared, and key suppliers are audited – with all data instantly accessible to all parties. In short, they are prepared. Such practice can form a key part of compliance with the international standard for security management systems for supply chains, ISO 28000:2007, or with Authorised Economic Operator certification – which requires the demonstration of control measures, including a risk and safety and security assessment “available and understood by all relevant staff”, and a detailed report highlighting all business risks and threats, and the measures taken to address them.

Taking such steps not only proactively demonstrates best practice, but also often allows organisations to identify opportunities to improve their operational efficiency.

As the waters recede, many businesses and boards will begin to see the financial impact of the floods. Taking proactive action now can put you in the best possible place to avoid a similar fate.