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The days of planning solely for low-probability but high impact events that could disrupt an organization's supply chain are over, according to Gary Lynch, leader of Marsh's Global Supply Chain Risk Management Practice and Pandemic Response Center. Any risk in an organization's entire supply chain can significantly affect its bottom line.
Speaking at a recent Webcast, "Supply Chain Management for Turbulent Times," sponsored by Supply Chain Management Review, Lynch explained that "parasitic" risks are those that are "imbedded in every process and every resource in the supply chain." Since such risks are omnipresent, uncertainty is constant. "Organizations can't control the uncertainty but they can mitigate the exposure to the uncertainty and create some level of agility and resiliency in responding to the threats," Lynch explained.
"Resiliency can be addressed by determining where the exposure to uncertainty exists and then measuring it. So when trying to control exposure to uncertainty, we can start to quantify and qualify it and then mitigate and finance it," Lynch said adding, "We can measure the uncertainty on the quantitative side by looking at the relevant issues across the supply chain and determining what the maximum loss would be and calculating it in terms of lost revenue, margins, and cash flow. We can also do this qualitatively by looking at impacts on brand, strategy, and ability to comply with certain requirements."
The key to being able to manage supply chain risks is the ability to systematically prioritize, react to, mitigate, and finance risks with scarce resources, according to Lynch.
"If we look across the supply chain, we can calculate potential losses and measure their impacts. And we can do that at different points in the supply chain to measure the risks in a common way," Lynch explained.
Lynch also provided a case study of an organization that is using a three-pronged approach to managing its supply chain.
Listen to a replay of the Webcast.
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Learn more about Supply Chain Risk Management.
Listen to a replay of the Webcast.
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