@Risk

Most companies have tightened up their internal due diligence procedures over the past few years, but many remain unclear about how to test and evaluate the due diligence of potential suppliers.

That’s a big concern because, as research from the international legal practice Norton Rose Group shows, suppliers and their customers can often have very different perceptions of risk.

For example, the Norton Rose Group’s new survey found that customers rate reputational damage as a primary risk, but suppliers rank it only a secondary risk. On the other hand, suppliers see service performance failure as a primary risk, while their customers view it as a secondary risk.

In addition, nearly half (49 percent) of the customers polled felt suppliers should manage political/jurisdiction risk. But, only 8 percent of suppliers consider it their responsibility.

This disconnect leaves customers exposed to risk. And yet, the majority (65 percent) of companies in the study admitted that they do not conduct detailed due diligence on the incoming key personnel provided by their supplier.

“As many organizations have found to their cost, there is no ‘one-size-fits-all’ solution for risk management and it should never be seen as a box-ticking exercise – customers need to visit a potential supplier, test their technology and speak to other customers of that supplier,” Mike Rebeiro, group head of technology and innovation at Norton Rose Group, explained. “The majority of customers assume that their suppliers will have done the necessary due diligence on their own staff and do not see the need to repeat the exercise. This is surprising given the impact a single rogue employee can have on the reputation of a business and all associated organizations, as underlined by the scope of the Bribery Act 2010.”

The survey, which analyzed a wide range of current outsourcing practices and trends, also revealed that: (more…)

In the second annual Carbon Disclosure Project (CDP) Water Disclosure Global Report released last week, more than half (59 percent) of the companies surveyed said they are exposed to water-related risks such as flooding, scarcity and reputational damage.

What’s more, almost four in 10 (38 percent) already have experienced water-related business impacts, including disruption to operations from severe weather events (e.g., flooding) and water shortages.

And companies described most of their water risks as near- term. Nearly two-thirds (66 percent) of risks in the supply chain and 64 percent of risks in direct operations were identified as occurring between now and 2016.

But even so, the report also found that only 57 percent of the 190 publicly listed organizations that participated in the survey implement board-level oversight of water policies, strategies or plans. By comparison, a report released by CDP in September 2011 showed that 94 percent of Global 500 companies report board-level oversight of climate change.

Why the gap? While it’s encouraging to see that awareness about water risks is on the rise, it’s also clear that companies need to strengthen their oversight of water-related issues –particularly in the supply chain. The CDP report revealed that more than one-third of companies (38 percent) are unaware of whether they are exposed to water risk in their supply chains. In the Consumer Discretionary sector, which is dominated by industries that are particularly exposed to supply chain risk (e.g., retailers, hotels, resorts, and automobile manufacturers), that percentage rose to 41 percent.

The report also found that: (more…)

Supply chain failures continue to plague companies worldwide.

A recent study conducted by the Business Continuity Institute (BCI) found that a full 85 percent of the companies surveyed recorded at least one supply chain disruption in 2011. Interestingly, 40 percent of those disruptions originated further down the supply chain, past first tiers suppliers.

The research, which analyzed responses from more than 550 organizations across more than 60 countries, also revealed that: (more…)

Last spring, European credit risk managers were somewhat optimistic about delinquencies across mortgages, auto loans and other credit products.

Now, much of that confidence seems to have evaporated.

The third European Credit Risk Survey, which was conducted by FICO and Efma in September, found that: (more…)

Last week, the world population reached 7 billion. Almost concurrently, NRG Expert released new forecasts which show that, given the current rate of population growth, global electricity supply is not likely to keep pace with future energy needs.

According to the new study, the energy tipping point is only about 20 years from now. NRG Expert predicts that 2032 will be the pivotal year where global electricity demand is likely to surpass supply based on global generation.

Of course, population growth isn’t the only factor that impacts the sustainability of the world’s energy supply. As NRG Expert points out, depleted natural resources and the phasing out of nuclear power in developed and developing countries also play a role.

A new report from Capgemini seems to draw a similar conclusion. The 13^th edition of the European Energy Markets Observatory (EEMO) found that energy consumption growth in developing countries, the Fukushima accident and the slowing down of the needed investments made by utilities all will have negative consequences on the security of energy supply and greenhouse gas emissions in Europe. (more…)