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Mitigating Risks

8/31/2007

“The one thing that always gets you is the one thing you never planned for.” Sound wisdom from New York City-based Marsh Risk Consulting, offered during a Supply Chain Summit session dedicated to “Building a Resilient Retail Supply Chain.”

Stuart Winn, senior VP, Southeast practice leader for Marsh, led the presentation to help retailers understand risk mitigation and how to create viable business-continuity plans.

“Most companies underestimate risks and the impacts of a disruption in their supply chain,” he cautioned. “There are risks that are insurable—such as catastrophic disasters, property damages or loss, product liability and business interruptions. Then there are those uninsurable risks—demand volatility, supplier non-performance, work stoppages and emerging threats such as the potential of a pandemic.”

Top 10 Questions to Answer Before Disruption Occurs

What are the most critical aspects to protect in your supply chain?

What would be the impact of a disruption in your supply chain?

Are you insured for this type of risk?

How would you respond?

How long would it take you to respond?

How would your customers respond?

What are the repercussions of your customers’ responses?

How do you respond to temporary shifts in demand?

How would your competitors respond?

Could your brand and your company survive?

Either way, the impact on a retailer’s operations can be devastatingly disruptive. In addition to lost sales, shareholder value may plummet and the brand’s reputation could be severely, if not permanently, tarnished.

As retailers become increasingly reliant on global trading partners, risk mitigation and business-continuity plans must look beyond the retail enterprise to assess interdependencies between people, technologies, processes and physical dynamics across the supply chain.

“Retailers have to map resources to the critical processes and skills required to maintain operations,” advised Winn. “It is also important to match the level of an incident or crisis to the appropriate level of executive management.”

As a general starting point, retailers should address a number of questions including defining the most critical areas to protect, understanding the impacts of disruptions and predicting responses throughout the internal and external enterprises. Most importantly, the risk assessment must answer: “What does it take for the retail brand and company to survive?”

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