Thoughts for a Rainy (Business) Day

We can talk and talk about risk, but that won’t get the job done without a good, agile risk management program

Welcome to Risk, 2014. This issue of Supply & Demand Chain Executive is dedicated entirely to risk management and mitigation. Risk, we all know, is an ever-present, ever-threatening part of business. And it’s not just the big events like tsunamis, earthquakes and building collapses, but things like IP theft, cargo theft, inventory control, issues in the warehouse or during transport. And so much more.

We’ll talk about risk mitigation programs, and what it takes to get one implemented. But let’s start off here with quotes from some famous people in history—and business—and how they relate to supply chain:

Ralph Waldo Emerson: An ounce of action is worth a ton of theory. We can talk and talk about risk, but that won’t get the job done when disaster strikes. And having a manual gathering dust on some middle manager’s office shelf won’t do a bit of good either. There has to be an effective action plan that includes visibility throughout the supply chain.

Mark Twain: “Action speaks louder than words but not nearly as often.The great humorist’s words ring true. Talk is cheap, but without action, there is no risk mitigation.

And to those who say the cost of implementing a risk-management plan is too expensive, listen to John F. Kennedy: There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.Can you afford NOT to act? Toyota lost $1.2 billion in product revenue due to parts shortages following the Great Japan Earthquake and Tsunami of March 2011.  Honda lost $550 million and Nissan lost $434 million due to supply chain disruptions. In the electronics industry, Canon lost $1.2 billion in revenue, HP $800 million, and Sony Ericsson $330 million.

Mahatma Gandhi: “Action expresses priorities.” If your priority is keeping your supply chain flowing smoothly, then your vision has to include an action plan suited to it. Be active, not reactive.

Lao Tzu: If you do not change direction, you may end up where you are heading.” And that might not be good. You can’t predict everything, but you have to be nimble enough, agile enough to change course.

Gary Cohn, President, Goldman Sachs: “If you don’t invest in risk management, it doesn’t matter what business you’re in, it’s a risky business.” Goldman, of course, has had its own issues over the years, but Cohn is right on the money—pardon the pun—here. I would even go a step further and say, if you don’t invest in risk management, it’s a riskier business.

Finally, stepping away from the bottom line for a moment, just think of the damage to your brand if you’re ill-prepared. When Warren Buffett speaks, folks listen. And Buffett says, “It takes 20 years to build a reputation and 5 minutes to ruin it and if you understand this you will do things differently.”

That’s it for the philosophers, politicians and businessmen. The content on the following pages speaks volumes more about risk mitigation. Enjoy the issue.