@Risk

Risk is shifting from recession to recovery, according to results of a quarterly risk report released yesterday by AMR Research.

AMR asked 115 business executives about supply chain risks and mitigation strategies, and this new research shows that businesses are now beginning to focus on risks associated with the recovery cycle.

In fact, 44% of respondents in the AMR study believe the recovery cycle is the biggest risk in 2010. Why? They cited a variety of reasons, including potential commodity price increases, limited internal skills after workforce reductions, and problems meeting new demand with constrained capacity, low inventory, and transportation constraints.

By contrast, less than one-quarter (23%) of those in the study are worried that the recession will continue, resulting in weak customer demand.

Here are a few more data points that I found particularly interesting:

• Respondents identified the top three risks this quarter as: supplier product quality failures (31%); commodity price volatility (30%); and IP infringement (30%).

• 12% of manufacturers indicated that more than half of their suppliers have experienced disruptions that impacted their ability to serve them. (This is good evidence of the depth and breadth of the recession. It also tells me something about the risks that supply chains will continue to face as the global economy begins to recover.)

• Respondents cited the U.S. (33%), China (26%), and Latin America (14%) as contributing the most risk to their supply chains. AMR Research attributes this to the volume of activity, as well as inherent risks.

• For those polled, the most successful technology used to mitigate risk is supplier management (23%), followed by inventory optimization (17%), and sales and operations planning tools (17%).

• Over the past year, the fastest growing mitigation strategy was using nearshore regions for sourcing/manufacturing. 38% of respondents say an increase in cost competitiveness is behind this shift.

So, are we suddenly doing business in a less risky world? I don’t think so. However, compared to a year ago, the landscape may seem a little less rocky and a little easier to navigate. The executives in this study may have downgraded risk somewhat, but implementing a comprehensive supply chain risk management strategy remains fundamental to long-term success in today’s complex and often unpredictable global marketplace.

“Even as the economy begins to recover, the impact of the recession on manufacturers and retailers will be long-lasting,” says Noha Tohamy, vice president of research at AMR Research and author of the report. “Global supply chains will continue to face major risks in 2010 and beyond. As such, designing a supply chain risk management strategy is still crucial.”

You can see the full AMR Research study here (registration required).