Firms can also avoid supply chain risks by adopting a thorough approach to third-party risk management. 

De-risking begins with asking the right questions, particularly when onboarding new suppliers, such as who they are and who they’re doing business with, as well as understanding material risk factors like financial stability and business practices. 

Compliance teams should return to this practice regularly at each potential change in risk level, so should a supplier’s risk status change, they can act upon the information. 

Without consistent oversight, a singular incident of poor practice can impact an entire supply chain, potentially resulting in costly operational delays, regulatory breaches and financial penalties. 

How can firms prepare for less predictable risks like natural disasters?

The risks posed by catastrophic environmental events are increasing significantly in cost, frequency and severity.

A report on the impact of climate-related disasters in the US by the National Centers for Environmental Information revealed that in 2023 major weather and climate events in the US resulted in US$92.9bn in damages. 

The financial damage posed by these increasingly frequent natural disasters underscores the need for businesses to build resilience against such risks, particularly to protect their supply chains. 

Building resilience begins with using climate data and predictive analytics, which allows companies to pinpoint high-risk areas and adjust sourcing and logistics strategies. 

Firms may also consider relocating operations from vulnerable zones, establishing relationships with alternative suppliers and enhancing overall supply chain flexibility to improve adaptability in the face of evolving environmental risks.

By combining environmental data analysis with proactive supplier monitoring, organisations are better equipped to anticipate, adapt to and withstand emerging threats to their supply chains.

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