From countless high street brands shutting shop to Honda’s recent planned plant closure – all in the backdrop of a country in the throngs of Brexit – UK businesses are experiencing uncertainty not seen since the last financial crisis. Businesses have a lot to contend with; as trade, currencies, jobs and much more hang in the balance, compliance and procurement professionals are also weighing up supply chain risk and how leaving the UK can impact the businesses they work with.
Our most recent sentiment report provides an overview of the challenges and opportunities facing these professionals. Unsurprisingly, the current business environment and volatility surrounding Brexit contributed to a loss in overall confidence. Not only did a third (33%) of professionals say Brexit is a liability to the business but the lack of clarity from the UK government, constant debating in parliament over the exit deal and economic uncertainty – the volatility of the pound, for example – contributed to a slip in confidence of effective third-party risk management.
In spite of Brexit-related change, identifying environmental, social and governance (ESG) impact in the supply chain, the convergence of compliance & procurement departments and the mitigation of fraud rose dramatically. The first step to overcoming all these challenges is knowing and acknowledging each one. Only then can supply and compliance professionals begin to mitigate risk in the supply chain.
Knowing your supply chain inside out
There is no denying the serious issue facing businesses in the UK as the government navigates the unprecedented task of leaving the European Union. What’s becoming clearer is the many other factors preventing professionals from gaining full insight and transparency into the supply chain, as highlighted in the report.
Firstly, concerns for ESG rose dramatically as professionals struggled to identify, account and monitor for the issue within third party risk management programs. Secondly, the ongoing convergence of supplier risk management and compliance highlighted confusion among business professionals, with organisations unsure if the union of the two departments would be positive or negative. Lastly, the ability to detect and respond to fraud is a challenge that needs to be urgently solved as 74% stated it has an overall impact on a company’s brand; the EU’s anti-money laundering blacklist, introduced in 2017 and updated this year, was a positive move to stamp this kind of activity out.
With all of these concerns (and more) on the plates of compliance and procurement professionals, the first step to managing business risk is being aware of the increased pressures to develop and maintain third-party risk management and compliance programs. These programs need to meet today’s requirements, but also help professionals plan for a future in the UK beyond Brexit.
The importance of transparency in the supply chain
Having a fully transparent supply chain is paramount, but not always easy to achieve. Fraudulent activity and Brexit-related regulatory change are complex issues, but bigger challenges including human slavery affects businesses worldwide. Modern slavery is actually the fastest-growing organised crime with more than 40 million worldwide victims. In the UK last year, more than 5,000 potential victims of modern slavery and trafficking were referred to UK authorities, a record number.
John Lewis Partnership an Habitat for example, were forced to withdraw granite worktops over human rights violations including slavery and child labour. The UK government recently introduced an independent Anti-Slavery Commissioner to help combat the issue, but more can be done from a business standpoint; a clean and transparent supply chain – i.e. knowing exactly what businesses a company is working with – can help avoid this kind of association in the first instance.
How can data help with supply chains?
At a time when procurement and compliance professionals face more pressure to reduce inefficiencies, lower costs and mitigate risk with limited resources, a mastery of data at the enterprise level is critical to improving and maintaining the supply chain.
While a company might have oceans of data, it might all be connected to disparate systems or siloes, which can result in inaccuracies and errors across the organisation. This lack of data cohesion hampers efforts to maintain a “single source of truth” and an ability to manage information across the business and therefore the supply chain.
By using a master data strategy (a globally consistent entity information system spanning all areas of the business), organisations are able to better collate and aggregate data. This not only creates value and reduces costs, but provides a comprehensive view of suppliers, partners and customers across a supply chain.
The final word
Everything from environmental disruption and global trade wars, to fraudulent activity and regulatory change can hurt a business. Supply chain risk remains one of the trickiest aspects of business today, with plenty on the line for businesses that don’t attend to companies they work with in their often sprawling network.
A data-led approach is the best way to guarantee a healthy supply chain, mitigate risk and ensure companies are fully prepared for change.