Today’s globalized, interconnected business landscape means companies are often hinged on complex supply chains.
But organizations are only just waking up to the reality of supply chain disruption as a result of geopolitical and environmental factors, according to the chief executive of a risk management firm.
“Organizations are just beginning to think about [geopolitical and environmental risk] broadly in the context of third parties. The reality is, no business is an island and they have suppliers, service providers and public infrastructures they depend on,” David Nolan, founder and CEO of Fusion Risk Management, told Corporate Risk and Insurance.
While it’s a risk that is coming to the forefront, many organizations lack an in-depth understanding of the complex and often global factors that can be at play in even a relatively simple supply chain.
“A lot of companies don’t understand that products and services may be coming through areas that aren’t stable, or through areas that are more vulnerable to weather-related events,” Nolan said.
“As people think more broadly, those categories become more concerning, and the likelihood of an event dramatically increases if all suppliers are in scope. The reality that something will hit, somewhere in my supply chain, either within my organization or out through to my suppliers or their suppliers, becomes not a possibility but a probability,” he said.
According to Nolan, the risks around business disruption arising from third-parties are beginning to be elevated to the senior echelons of businesses.
“I think the phase we are in now is the realization that every organization is going to have to manage through a disruption, whether it’s a cyber disruption, a terror disruption or an act of God, and I think that’s really what’s elevating this area of risk into the C-suite,” he said.