Supplier Risk and Compliance: Increasingly Important but Under-Recognized
Managing supplier risk and compliance is very important, but unfortunately, that importance is often under-recognized. When a marketing executive or engineer does a great job, everyone sees the increase in sales or a great new hit product launched with a big bang … and with those successes, the bonuses and praise flow. When a supplier risk and compliance manager does a great job, then what happens is … nothing goes wrong. Everything goes smoothly. And most of the time, nobody notices. Of course, if they mess up, all hell breaks loose.
It is not so surprising then that our research found that most companies under-invest in managing supplier risk. This is at a time when the need for stronger capabilities to manage risk and compliance are greater than ever. The supply base of most companies has become more global, outsourced, and interconnected than ever before. Volatility in the economy, fluctuating commodity prices, and exchange rates add additional risks. The range of risks goes way beyond just the financial stability of the suppliers.
Furthermore, compliance requirements have been steadily increasing over the decades. Corporations have more and more internal compliance requirements. Companies are becoming much more prescriptive and detailed in their supplier mandates in order to run their supply chain and operations more efficiently and smoothly. Compliance manuals for suppliers used to be just a few pages. Now they can be literally hundreds of pages with everything from routing guides, labeling and packaging requirements, shipping and packing, to environmental requirements and more. More companies have supplier codes of conduct, recognizing that the court of public opinion holds them responsible for what happens in their supply chain.