+1443 776-2705 panelessays@gmail.com
  

who knows anything about supply chain
 

25

2
Supply Chain Risk Management
The As- Is Landscape

In.this.chapter.we.provide.an.overview.of.the.growth.of.supply.chain.risk.
management. (SCRM). during. the. last. few. years. and. provide. additional.
insight. into. who. is. talking. about. SCRM,. what. they. are. saying,. and. the.
tone.of.the.dialogue..We.will.provide.a.summarized.view.of.SCRM.top-
ics,.announcements,.articles,.reports,.and.survey.results.that.help.define.
the. state. of. SCRM. today.. We. will. also. share. a. perspective. on. SCRM.
through.a.different.prism:.the.Four.Pillars.of.SCRM..We.will.then.provide.
a.maturity.level.for.each.pillar..The.chapter.concludes.with.discussion.of.
SCRM.adoption.

a ChROnOlOgy Of Supply Chain
RiSk ManageMent

Let’s.start.by.providing.a.sense.of.the.growth.of.SCRM.in.terms.of.aware-
ness,. discussions,. articles,. papers,. surveys,. solutions,. tools,. and. more..
During. our. research. for. this. book. we. compiled. hundreds. of. reference.
works. in. order. to. provide. a. comprehensive,. end-.to-.end. perspective. of.
SCRM.. Using. these. reference. works. and. our. experience,. we. have. com-
piled.a.chronology.of.the.growth.we’ve.witnessed.and.the.tone.and.tenor.
of.the.dialogue.

While.many.risk.management.studies.and.surveys.were.conducted.dur-
ing.2000–2010,.our.focus.starts.with.the.latter.part.of.that.decade..Most.
supply. chain. executives. became. interested. in. SCRM. after. the. financial.
meltdown.of.2008..Company.after.company.watched,.almost.helplessly,.as.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

26 • Supply Chain Risk Management: An Emerging Discipline

customer. orders. were. canceled,. suppliers. entered. bankruptcy,. and. com-
modity. markets. became. increasingly. volatile.. For. many,. 2008. was. the.
genesis.of.their.risk.management.efforts.

2009

Most.operations.management.and.supply.chain.management.profession-
als. are. familiar. with. the. International. Organization. for. Standardization.
(ISO).Group.and.its.set.of.standards.that.revolve.around.quality.control.
and.process.reliability,.such.as.ISO.9000..In.2009,.the.ISO.Group.delivered.
its.first.set.of.standards.directly.relating.to.supply.chain.risk,.which.was.
a.major.recognition.of.the.importance.of.SCRM..These.standards.include.
ISO. 73. and. ISO. 31000.. ISO. 73. profiles. the. vocabulary. and. taxonomy. of.
risk.within.the.supply.chain,.and.ISO.31000.provides.insight.into.the.prin-
ciples,.practices,.and.guidelines.to.effectively.identify,.assess,.mitigate,.and.
manage.supply.chain.risk.

A.key.report.during.this.period.was.Accenture’s.2009.Managing Risk for
High Performance in Extraordinary Times.1This.global.report,.which.sur-
veyed.260.CFOs,.chief.risk.officers,.and.other.executives.across.21.coun-
tries,.came.right.after.the.2008.financial.meltdown..This.report.explored.
the.details.of.what.was.going.on.around.the.globe.relative.to.risk.and.its.
impact. on. businesses. and. supply. chains.. It. was. one. of. the. first. compre-
hensive. analyses. of. the. cause. and. effects. of. risk. to. global. supply. chains..
This. report. revealed. that. 85%. of. executive. respondents. said. their. com-
pany.needed.to.overhaul.its.approach.to.risk.management;.40%.said.their.
companies.already.had.increased.or.would.increase.their.investments.in.
broader.risk.management.capabilities;.41%.stated.their.risk.management.
costs. increased. by. at. least. 25%. over. a. three-.year. period;. and. only. 27%.
said.their.risk.management.function.was.involved,.to.any.great.extent,.in.
objective.setting.and.performance.management.

Accenture. concluded. that. steps. needed. to. be. taken. to. manage. supply.
chain.risk.to.protect.a.company’s.competitive.advantage,.reputation.and.
branding,. and. credit. ratings;. to. maintain. positive. comments. by. ana-
lysts;.and.to.ensure.access.to.capital.over.time.at.a.reduced.cost..Overall,.
Accenture.reported.that.many.companies.had.a.long.way.to.go.before.they.
should.feel.comfortable.about.their.company’s.state.of.risk.management.

AMR.released.a.report.on.risk.in.U.S..manufacturing.to.get.a.sense.of.
how.businesses.feel.about.the.future.and.what.they.saw.in.terms.of.risk..The.
top. three. concerns. of. U.S.. manufacturers. were. supplier. quality. failures,.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

Supply Chain Risk Management: The As-Is Landscape • 27

commodity. price. volatility,. and. intellectual. property. infringement.. In.
particular,.supplier.solvency.was.a.key.concern..Furthermore,.respondents.
said.that.doing.business.with.Chinese.suppliers.was.contributing.the.most.
to.overall.risk,.scoring.the.highest.in.11.out.of.15.risk.categories.evaluated.

2010

In.2010,.we.began.a.course.for.a.master’s.of.business.administration.degree.
by.explicitly.profiling.the.emerging.elements.of.supply.chain.risk.manage-
ment.. The. initial. courseware. was. made. up. of. articles,. survey. outcomes,.
reports.from.the.insurance.industry,.and.the.basics.of.good.risk.manage-
ment.. As. the. course. grew. in. maturity,. a. Supply. Chain. Risk. Assessment.
Tool.emerged.that.codified.the.effects.of.supply.chain.maturity.as.it.relates.
to.mitigating.risk..The.basic.premise.was.that.as.the.supply.chain.matures,.
the.inherent.risks.faced.by.that.supply.chain.diminish.

The.Supply.Chain.Risk.Assessment.Tool,.featured.in.Figure 2.1,.encom-
passes.about.100.questions-.of-.discovery.about.a.company’s.supply.chain.
across.10.tenets.of.the.entire.supply.chain..It.is.a.perception-.based.tool.that.
captures.the.complexion.of.a.company’s.operating.environment.relative.to.
a.maturity.model.and.then.develops.an.inherent.risk.factor.for.every.tenet..
Risk.factors.are.then.plotted.inside.a.spider.diagram.for.visual.presenta-
tion.using.a.red,.yellow,.and.green.designation..There.will.be.more.discus-
sion.about.this.tool.later.in.the.book.

Risk Gradient
Low Risk 1 to 4

Medium Risk 5 to 7

High Risk 8 to 10

Heat Map Color Key

Leadership
10.00
8.00
6.00
4.00
2.00
0.00
1.00
3.00
5.00
7.00
9.00

Balanced
Scorecard

S&OP
Processes

Information
Systems

Integrated
Supply Chain

Customer
Demand

SCRM Risk “Heat Map” Assessment

Industry

Manufacturing

Supply

Logistics

figuRe 2.1
Tools:.supply.chain.risk.assessment.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

28 • Supply Chain Risk Management: An Emerging Discipline

During.2010,.the.Massachusetts.Institute.of.Technology.(MIT).Center.
for.Transportation.and.Logistics.produced.its.preliminary.findings.from.
the.Global.Supply.Chain.Risk.Management.research.project..The.survey.
collected. 1,400. usable. responses. from. companies. in. 70. countries.. The.
project’s. primary. goal. was. to. understand. if. regional. and. cultural. differ-
ences.affect.how.people.think.about.and.manage.supply.chain.risks..This.
survey.was.a.seminal.point.in.the.birth.of.SCRM..The.final.report.covers.
differences.in.attitudes.about.risk,.differences.in.risk.frequencies.(internal.
and. external. events). and. priorities,. and. differences. in. practices. across.
countries.and.industries.2.It.is.one.of.the.few.reports.that.approached.risk.
from.a.cross-.cultural.perspective.

The. MIT. report. concluded. that. respondents. showed. a. marked. prefer-
ence. for. risk. prevention. as. opposed. to. planning. and. response,. but. that.
was.influenced.by.national.culture..Furthermore,.most.respondents.indi-
cated. that. risk. planning. and. prevention. should. be. carried. out. centrally.
in.an.organization,.while.actual.responses.to.most.risk.events.should.be.
managed. locally.. Respondents. were. also. asked. to. rank. the. top. supply.
chain.disruptions.for.which.their.company.should.prepare..A.breakdown.
in.supply.quality,.supplier.financial.failures,.and.internal.process.failures.
topped.the.list.

Aberdeen. Group. also. produced. a. comprehensive. report. on. SCRM..
Their. findings. further. supported. the. notion. that. SCRM. is. evolving. as.
a. concept.3. One. of. the. key. findings. from. this. study. was. an. analysis. of.
the.reasons.behind.pursuing.an.aggressive.risk.management.agenda..The.
top.reasons.include.protecting.the.organization.and.its.brand,.safeguard-
ing. against. an. unpredictable. global. economic. environment,. a. corporate.
mandate. to. institutionalize/.improve. risk. management,. complying. with.
new. and. changing. regulations,. and. maintaining. and. improving. share-
holder.value.

And. what. did. the. Chief. Procurement. Officers. (CPOs). plan. to. do. to.
manage. risk. according. to. Aberdeen?. The. CPOs. expected. to. develop.
clearly. defined. metrics. for. supply. performance. and. risk,. develop. con-
tingency. plans. for. supply. disruptions,. use. external. information. services.
to. monitor. and. assess. supply. risk,. and. define. ownership. of. risk. within.
the.organization.

This.groundbreaking.report.was.one.of.the.first.times.a.research.orga-
nization. put. together. a. comprehensive. profile. in. an. effort. to. codify. the.
elements.of.a.good.SCRM.journey..Figure 2.2.illustrates.the.actions.items,.
capabilities,.tools,.and.techniques.that.will.help.ensure.success.within.the.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

Supply Chain Risk Management: The As-Is Landscape • 29

risk.management.arena..The.bulk.of.Aberdeen’s.findings.about.and.jour-
ney.toward.good.SCRM.hold.true.today.

Also.in.2010.PRTM.(now.part.of.PricewaterhouseCoopers).released.its.
Global Supply Chain Trends Report.4. A. few. of. the. novel. themes. emanat-
ing.from.this.study.were.that.almost.75%.of.all.the.respondents.believed.
that. demand. and. supply. volatility. will. become. the. biggest. roadblock. to.
capturing. profits. in. the. economic. upturn,. and. more. than. 80%. expected.
complexity.in.their.supply.chains.to.increase.dramatically,.partly.due.to.
an. increase. in. product. proliferation.. The. PRTM. study. produced. several.
important.takeaways:

•. Demand.and.supply.volatility.is.here.to.stay.
•. Supply.chain.complexity.will.be.with.us.for.many.years.
•. End-.to-.end. supply. chain. cost. optimization. will. be. critical. mov-

ing.forward.
•. Risk. and. opportunity. management. should. span. the. entire. supply.

chain,.including.with.key.partners.

This. research. concluded,. and. this. has. certainly. been. borne. out. by.
subsequent. experience,. that. supply. chains. will. become. more. volatile.

Pressures Actions
– Protect the organization
and its brand/
competitive advantage
– Unpredictable global
economic environment

Aberdeen Group CPO Survey Report & SCRM Report 2010

– Implement processes
aligning risk
management with
compliance/governance
– Develop supply risk
mitigation strategies
– Build risk aware
culture throughout
the organization

– Standard risk
management
policies and procedures
across the enterprise
– Management
accountability
for risk management
activities within overall
governance framework
– Transparency in
communication of risk
information (i.e., policies
including escalation
criteria, procedures,
practices & thresholds)
– Risk information
integrated into core
decision-making (i.e.,
strategic planning
capital allocation and
performance
management)

– Enterprise Risk
Management (ERM)
platform/software
– Enterprise governance,
risk, and compliance
(GRC)
platform/Software
– Event management
(triggers/alerts)
– Query & reporting tools
– Enterprise BI platforms
– Heat
maps/dashboards/
balanced scorecard tools
re?ecting risk
– Predictive
analytics/process
modeling tools for
measuring and
monitoring risk

Capabilities Enablers

figuRe 2.2
Best-.in-.class.SCRM.framework.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

30 • Supply Chain Risk Management: An Emerging Discipline

and. complex.. The. researchers. also. concluded. that. most. companies. are.
ill-.prepared.to.manage.this.complexity.and.that.risk.management.will.be.
a.critical.success.factor.affecting.corporate.success.

We.also.saw.two.more.reports.explicitly.targeting.supply.chain.disrup-
tions. and. their. financial. impacts.. Chainlink. Research. and. Hendrick. &.
Singhai.had.been.working.on.attempting.to.codify.the.financial.impacts.
of.supply.chain.disruptions.on.company.bottom.lines..According.to.these.
resources,. a. publicly. traded. company. that. experiences. a. moderate. to.
severe.supply.disruption.should.expect.to.realize.a.107%.drop.in.operating.
income.on.average,.114%.drop.in.return.on.sales,.93%.drop.in.return.on.
assets,.7%.lower.sales.growth,.11%.growth.in.cost,.14%.growth.in.inven-
tories,. and. a. 10%. reduction. in. shareholder. value.. This. is. one. of. the. first.
reports.that.linked.risk.events.to.tangible.performance.shortfalls.

Finally,. a. report. from. the. Business. Continuity. Institute. (BCI). in. the.
United.Kingdom.revealed.serious.levels.of.supply.chain.failures.and.dis-
ruptions. around. the. globe.. This. study. found. that. weather. disruptions.
affected.more.than.half.of.all.companies.in.2010,.up.from.29%.the.previ-
ous.year..Unplanned.IT.and.telecommunication.outages.were.second.on.
the. list. of. most. frequent. disruptions.. More. than. one. third. of. companies.
mentioned.service.failures.by.outsourcer.providers,.up.from.20%.the.pre-
vious.year..More.than.50%.of.the.respondents.stated.that.their.disruptions.
led.to.a.loss.of.productivity.and.20%.of.the.respondents.admitted.they.had.
suffered.damage.to.their.brand.or.reputation.as.a.result.of.a.disruption.

The.report.concluded.that.the.serious.levels.of.supply.chain.disruption.
experienced. by. organizations. around. the. globe,. coupled. with. the. wide.
range.of.threats,.underscores.the.business.case.for.investment.in.business.
continuity.planning.(BCP)..We.will.go.into.more.detail.later.about.BCP..
For.now,.consider.BCP.to.be.an.internal.insurance.policy.or.risk.response.
plan.that.identifies,.assesses,.mitigates,.and.manages.risk.scenarios.

2011

During. 2011. Accenture. began. to. talk. about. the. “new. normal”. of. global.
supply.chains..The.new.normal.featured.more.global.sourcing.and.manu-
facturing,. hyper-.demand. requirements,. longer. supply. chain. lead. times,.
more.potential.points.of.failure,.and.managing.supply.chains.in.far-.flung.
corners.of.the.world.5.With.these.elements.of.supply.chain.risk.coming.to.
the.surface,.Accenture.produced.a.set.of.principles.that.support.the.birth.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

Supply Chain Risk Management: The As-Is Landscape • 31

of. supply. chain. risk. management. as. a. discipline.. These. six. principles.
include.the.following:

. 1.. Integrate.risk.management.practices.across.all.business.functions.to.
ensure.understanding,.commitment,.and.alignment

. 2.. Identify,.measure,.and.prioritize.risks.by.mapping.out.the.complete.
supply.chain.“ecosystem”

. 3.. Emphasize. operational. flexibility,. global. visibility,. and. diversified.
supplier.portfolio.to.blunt.the.impact.of.supply.chain.calamities

. 4.. Use. probability. modeling. to. identify. unknown. risks. and. develop.
contingency.plans

. 5.. Insist. that. suppliers. and. business. partners. perform. up-.front. due.
diligence

. 6.. Hedge.risk.by.making.prudent.choices.about.insurance

We.will.dig.deeper.into.every.one.of.the.six.tenets.throughout.the.book.
AMR. surveyed. more. than. 500. executives. worldwide. during. 2011. and.

asked.questions.about.supply.chain.risks,.disruptions,.effects.of.those.dis-
ruptions,.and.methods.to.mitigate.and.manage.risk..Supply.failures.were.
the. most. cited. disruption. noted. by. executives.. Quality. failures,. natural.
disasters,. and. commodity. price. volatility. were. also. cited. by. almost. one.
third. of. respondents.. In. terms. of. the. most. common. risk. management.
approaches,.executives.said.they.relied.on.(in.order.of.mention).meetings/.
discussions.with.external.partners.and.suppliers,.predictive.analytic.tools,.
staying.current.with.supplier.business.continuity.plans,.utilizing.reports/.
data.from.third-.party.sources,.and.utilizing.performance.risk.dashboards.

In.October.2011.SCM.World,.the.global.institute.for.supply.chain.learn-
ing,.training,.and.development.at.Stanford.University,.released.its.annual.
Chief Supply Chain Officer.(CSCO).study.6.The.survey.involved.750.global.
executives.of.which.over.50%.were.vice.presidents.or.higher..The.report.was.
conducted. during. the. immediate. aftermath. of. the. Japanese. earthquake.
and. tsunami,. creating. an. interest. in. understanding. how. supply. chains.
were.reacting.to.these.disruptions..The.report.highlighted.the.disruptions.
due.to.the.tragic.events,.how.many.companies.had.suffered.shortages.in.
supply. and. capacity,. lost. sales,. inventory. write-.offs,. and. plant. closures.
across. many. industries.. Even. though. the. report. didn’t. examine. supply.
chain. risk. specifically,. it. did. talk. at. length. about. how. the. supply. chain.
is.a.critical.success.factor.and.a.driving.force.for.competitive.advantage..

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

32 • Supply Chain Risk Management: An Emerging Discipline

Another.key.theme.throughout.the.report.was.that.supply.chain.sustain-
ability.is.critical.in.terms.of.driving.value.for.the.corporation,.especially.
in.times.of.demand.and.supply.volatility.

During.this.period.we.also.picked.up.on.definitions.of.a.resilient.supply.
chain.from.the.Supply.Chain.Council.7.While.the.Supply.Chain.Council.
was. updating. its. SCOR. Model. and. risk. definitions. and. frameworks,. the.
importance.of.resiliency.in.the.supply.chain.came.to.the.surface..Essentially,.
the.council.concluded.that.in.a.world.of.technical.change,.financial.risk,.
political.turbulence,.and.mounting.regulatory.pressures,.industry.growth.
does. not. always. proceed. smoothly.. Risk. management. is. especially. chal-
lenging. when. threats. are. unpredictable. At. the. same. time,. corporations.
are.accepting.broader.responsibility.for.social.and.environmental.impacts.
of.their.supply.chains..A.resilient.enterprise.has.the.capacity.to.overcome.
disruptions.and.continually.transform.itself.to.meet.the.changing.needs.
and.expectations.of.its.customers,.shareholders,.and.other.stakeholders.

2012

Another.study.by.the.Business.Continuity.Institute.addressed.the.impact.
of.the.Great.East.Japan.earthquake.and.Christchurch.earthquake.in.New.
Zealand..The.key.take-.away.from.this.research.was.the.wide-.ranging.dif-
ferences. in. an. important. SCRM. metric,. time-.to-.recovery.. BCI. assessed.
how. long. it. took. supply. chains. to. recover. from. the. impact. of. the. earth-
quakes..The.compelling.statistic.is.that.almost.50%.of.all.the.respondents.
needed.more.than.five.weeks.to.recover.

Aberdeen. Group. released. a. report. on. risk. from. a. financial. perspec-
tive.8.Coming.off.the.heels.of.the.Japanese.disasters,.the.report.attempted.
to. understand. the. risk-.adjusted. strategies. actually. operating. inside. the.
CFO’s.office..The.report.concluded.that.whether.a.company.is.looking.to.
reroute. a. supply. source. away. from. a. natural. disaster. or. seeking. to. miti-
gate.the.risk.associated.with.tax.audit.exposure,.it.is.clear.that.companies.
with. processes. and. tools. that. enable. clear. visibility. to. risk. entities. and. a.
means.to.react.quickly.are.going.to.be.the.ones.that.hold.the.key.to.effec-
tive.budgeting.and.profitability.

Zurich,.one.of.the.largest.insurers.in.the.world,.published.a.set.of.sup-
ply.chain.risk.statistics.and.some.revealing.numbers.associated.with.supply.
chain.business.interruptions.9.The.insurer.released.a.report.that.profiled.
the. causes. behind. supply. chain. disruptions. derived. from. an. analysis. of.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

Supply Chain Risk Management: The As-Is Landscape • 33

insurance.claims.over.a.several-.year.period..Clearly,.this.analysis.addressed.
primarily.hazard.risk..The.insurer.found.that.85%.of.organizations.expe-
rienced.at.least.one.supply.chain.incident.that.caused.disruption.to.their.
business.. More. than. 50%. of. supply. chain. disruptions. occur. because. of.
adverse.weather,.and.just.over.40%.occur.because.of.unplanned.IT.or.tele-
com. outages.. Other. significant. disruptions. occurred. because. of. loss. of.
talent/.skills,. product. quality. incidents,. civil. unrest/.conflicts,. and. cyber-
attacks..Of.the.disruptions.that.occurred,.nearly.40%.originated.below.the.
tier-.one.supplier.level.

A.research.article.titled.Researcher’s Perspectives on Supply Chain Risk
Management presented.a.study.of.the.diversity.of.perspectives.surround-
ing.supply.chain.risk.management.10.This.study.identified.three.gaps.in.the.
body.of.knowledge:

•. Definition gap—there. is. no. clear. consensus. on. the. definition. of.
SCRM. because. many. limit. the. scope. of. SCRM. to. rare. but. large.
events,. while. others. believe. that. SCRM. is. about. supply–.demand.
uncertainties..(Hopefully,.the.definitions.we.presented.in.Chapter 1.
help.to.clarify.this.term.)

•. Process gap—there. is. a. lack. of. research. on. an. important. aspect. of.
the.risk.management.process,.namely,.the.response.to.supply.chain.
risk.incidents.

•. Methodology gap—there.is.a.shortage.of.empirical.research.in.the.
area.of.SCRM.

During. this. period. an. important. study. on. supply. chain. risk. was. con-
cluded.by.Deloitte.and.Forbes.Insights..This.survey.covered.192.U.S..exec-
utives,.CEOs,.CFOs,.SVPs,.and.directors.across.multiple.industries..One.
finding.that.stands.out.from.this.work.is.that.91%.of.respondents.said.they.
planned. to. reorganize. and. reprioritize. their. approaches. to. risk. manage-
ment.during.the.subsequent.three.years.

A. disconcerting. aspect. of. this. survey. was. the. completely. scattered.
approach. toward. risk. responsibility.. Fully. one. quarter. of. respondents.
indicated.the.CEO.is.primarily.accountable.for.risk.management;.almost.
a.quarter.said.the.said.the.CFO/.treasurer’s.office.is.primarily.responsible;.
almost. 20%. said. the. chief. risk. officer/.treasurer. is. responsible;. and. fewer.
than.15%.said.legal/.compliance.is.responsible..The.remaining.respondents.
were. spread. across. various. other. groups.. Future. risk. management. plans.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

34 • Supply Chain Risk Management: An Emerging Discipline

include. more. than. half. of. respondents. saying. their. company. planned. to.
elevate. risk. management. within. their. organization,. while. almost. 40%.
said.they.will.reorganize.to.support.enterprise.risk.management.(ERM),.a.
framework.introduced.in.Chapter 1..Almost.40%.of.respondents.said.they.
will.provide.more.staff.training,.while.almost.one.third.planned.to.incor-
porate.more.technology.into.their.risk.management.efforts.

And. finally,. SCM. World,. which. we. referenced. previously,. released. its.
annual.Chief Supply Chain Officer.report..This.report.surveyed.more.than.
twice.the.number.of.companies.as.in.2011.and.explored.five.main.topics,.
one.of.which.was.risk.management..A.novel.aspect.of.this.survey.involved.
SCM.World.asking.respondents.what.they.were.doing.to.identify,.assess,.
mitigate,. and. manage. risk. and. profiled. the. impact. of. risk. events. from.
both. demand. and. supply. disruptions.. From. this. study. we. learned. that.
the.highest.impact.from.supply.and.demand.disruptions.over.a.two-.year.
period.was.a.loss.of.sales/.revenue..In.order.of.impact,.subsequent.impacts.
included.lower.profits,.delays.in.product.launches.and.growth.plans,.loss.
of. customers,. higher. cost. of. capital,. damage. to. image. and. reputation,.
and.lower.share.price/.shareholder.value..This.research.revealed.the.many.
damaging.effects.of.supply.and.demand.disruptions.

2013

The.start.of.2013.featured.the.release.of.a.report.from.the.World.Economic.
Forum. (WEF). in. Davos,. Switzerland.. The. sponsors. of. the. report. were.
Zurich.Insurance,.Accenture,.Partners.against.Corruption.(PACI),.and.the.
World. Economic. Forum.. The. report,. titled. Building Resilience in Supply
Chains,. was. an. outcome. of. WEF’s. initial. Supply. Chain. Risk. Initiative.
started.in.2011..A.clear.finding.in.this.report.is.the.need.for.organizations.
to. shift. from. reactive. to. proactive. risk. management.. Another. relevant.
finding.is.that.more.than.80%.of.companies.are.now.concerned.about.sup-
ply.chain.resilience..Study. participants.also. indicated.there. is.a.need.for.
a.common.risk.vocabulary.and.that.cyber.risk.may.have.the.greatest.risk.
implications.for.supply.chains.

The. World. Economic. Forum’s. report. touched. on. what. it. will. take. to.
make. SCRM. a. bona. fide. business. discipline.. Perhaps. most. importantly,.
risk. management. must. become. an. explicit. and. integral. part. of. supply.
chain. governance.. Other. high-.level. suggestions. for. moving. SCRM. to. a.
business.discipline.include.the.following:

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

Supply Chain Risk Management: The As-Is Landscape • 35

•. Institute. a. multistakeholder. supply. chain. risk. assessment. process.
across.the.enterprise

•. Mobilize. international. standards’. bodies. to. further. develop. resil-
ience.standards

•. Incentivize.corporations.to.follow.agile,.adaptable.supply.chain.strategies
•. Expand. the. use. of. data-.sharing. platforms. for. risk. identification.

and.responses

A. RIMS.org. article. mentioned. the. Risk. Maturity. Index. developed. by.
AON.Insurance.and.the.Wharton.School.of.Business..The.index.suggests.
that. companies. with. the. highest. level. of. risk. maturity. (a. measure. that.
gauges.the.development.of.an.organization’s.risk.strategy.and.framework).
experience. 50%. lower. stock. price. volatility. than. less-.developed. counter-
parts.. Over. a. two-.year. period. (2010–2012). companies. with. higher. risk.
maturity. ratings. saw. greater. annual. stock. price. returns.. This. was. espe-
cially. apparent. when. the. only. companies. to. see. positive. returns. during.
that.volatile.period.were.those.with.the.highest.risk.maturity.levels..Those.
lower.on.the.maturity.scale.saw.losses.between.17%.and.30%..This.work.
again.pointed.out.the.critical.relationship.between.risk.management.and.
financial.outcomes.

Lloyd’s. of. London. released. several. statistics. in. 2013. associated. with.
the.Japanese.earthquake.and.tsunami.and.Thailand.floods..The.first.sta-
tistic. they. shared. was. the. combined. property. and. business. interruption.
losses,.which.reached.a.record-.breaking.$240.billion,.with.just.$47.billion.
of.the.losses.covered.by.insurance..The.insurance.industry.provides.sup-
ply. chain. interruption. products. called. contingent. business. interruption.
(CBI).. However,a. large. majority. of. companies. impacted. only. had. asset-.
based.property.damage.insurance..Some.of.the.elements.covered.by.CBI.
include. getting. workers. in. and. out. of. damaged. facilities,. working. to. get.
power.to.facilities,.and.shipping.and.receiving.goods.into.and.out.of.facili-
ties..Chapter 5.will.reexamine.the.floods.in.Thailand.from.a.risk.quanti-
fication.perspective.

An. interesting. report. from. the. Association. of. Insurance. and. Risk.
Managers. in. Industry. and. Commerce. (AIRMIC). titled. Supply Chain
Failures: A Study of the Nature, Causes, and Complexity of Supply Chain
Disruptions,. identified. seven. underlying. factors. that. tend. to. be. present.
whenever.supply.chains.go.wrong:.off-.shoring,.increasing.complexity,.cost.
pressures,.geographic.clustering,.modern.communications,.modern.pro-
duction. methods,. and. increasing. dependency.. The. report. also. estimated.

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group.
Created from apus on 2022-03-18 01:03:05.

C
o
p
yr

ig
h
t
©

2
0
1
4
.
T

a
yl

o
r

&
F

ra
n
ci

s
G

ro
u
p
.
A

ll
ri
g
h
ts

r
e
se

rv
e
d
.

36 • Supply Chain Risk Management: An Emerging Discipline

that.economic.losses.from.supply.chain.disruptions.have.increased.465%.
between.2009.and.2011.