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Time for a High-Tech Risk Makeover?

In an industry defined by innovation, successful high-tech leaders pride themselves on staying a step or two ahead of the competition and their customers. Being proactive is the key to winning in this fast-moving business.

So why then are these same leaders often caught off guard when unforeseen crisis threatens to disrupt their supply chains?

UPS research shows that while almost 50% consider themselves leaders in risk assessment, less than one-third of high-tech companies consider their firm a leader in other critical areas of risk management, including response execution and planning, risk mitigation and event coordination.

Though high-tech companies see value in risk management, according to the Fifth Annual UPS Change in the (Supply) Chain Survey (CITC), many executives aren't yet ready to turn the practice into a competitive advantage.

Tech leaders must look beyond the risk assessment phase to ensure their supply chains are ready for action when crisis hits. It's not a matter of if but when something potentially cataclysmic will happen.

Tech & risk today

High-tech companies use a variety of methods to mitigate and manage risk in their supply chains, the UPS survey shows.

The top two strategies globally are improving collaboration with suppliers and enabling better supply chain visibility. Other options include implementing supply chain traceability, improving factory maintenance and enhancing post sales management.

A spate of recent cybersecurity breaches have heightened attention on risk management, and many companies are using insurance to mitigate the overall risk. In the CITC survey, 35% said their company either already had third-party insurance or was considering purchasing it.

Understanding risk

However, supply chain complexity carries multilayered risks for high-tech companies, requiring a more comprehensive and informed management strategy. It's essential to take a holistic view of the supply chain and focus on all aspects of risk management from the front end to the back end, making sure not to overlook the returns process.

You can't look at risk solely through the prism of the supply side, as it has tremendous demand-side implications as well. And it's not just a short-term problem. A common misconception is that the unpredictability of natural disasters, for example, limits the upside of risk-management investments.

Don't buy into that line of thinking.

History tells us that the more companies plan and understand their risk exposure, the better their response when disaster strikes. It's not just how a company responds to a situation but how fast they respond.

How to take action

When asked about their top areas of concern, 51% of CITC survey respondents cited regulatory complexity. Forty percent cited financial payment flow, and 39% cited cyber security.

In trying to tackle this global problem, some companies might focus on improving inventory performance, while others want visibility into mixed factory networks or supplier diversification.

Savvy high-tech leaders see evaluations of their supply chains as a dynamic, ongoing process — not something you can do once and then leave alone. Risks change (as do opportunities), so assessment is continuous and evolving.

Decisions are influenced by a number of factors. Answer the following questions:

  • Do you have adequate visibility into – and understanding of – potential vulnerabilities in your supply chain?
  • Has your business experienced disruptions during the past two years?
  • If the disruptions had minimal impact, was that due to good planning or “dumb luck?”
  • Did you feel prepared to quickly recover from the disruptions?

Your answers will help you decide whether to perform risk assessments of potential supply chain vulnerabilities, evaluate the risk readiness and identify resources to respond accordingly. They'll also help you gauge flexibility in your system, determine the level of visibility into the supplier network and crystallize your overall data needs for better decision-making. 

Supply chains are getting longer and more complex. Businesses are sourcing internationally, selling globally or doing both. The most forward-looking companies understand that risk goes up exponentially when the supply chain becomes more complex. They also know that nimble risk management is one of the best ways to create and sustain value as a company.

For too many, this is a lesson learned too late. The same high-tech leaders who demand unparalleled foresight on so many issues should apply the same standard to risk management. 

1 comment on “Time for a High-Tech Risk Makeover?

  1. JanieHedgepeth
    January 3, 2016

    A good and useful information. I liek the above article. I recently check out some technology related information at hjmt.com.

     

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