Tag Archives: Risk management

Transforming Supply Chain Management with Intelligent Software

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Robotic Process Automation (RPA) technology to automate business tasks with AI. Concept with expert setting up automated software on laptop computer. Digital transformation and change management.

Supply chain project management has evolved, shifting from a focus on efficiency to navigating a complex landscape influenced by globalization, technology, and changing consumer preferences. The vulnerabilities exposed during events like the COVID-19 pandemic underscore the need for adaptability. The pandemic posed challenges, disrupting production, leading to closures, and causing delays and increased costs in global transportation.

Additionally, unpredictable shifts in consumer behavior created demand fluctuations, impacting industries differently. Inventory management became more challenging, resulting in shortages or excess inventory. Supplier reliability and labor shortages further strained production capacity.

The crisis highlighted the necessity for digital transformation, remote work, and technology adoption in supply chain management. Regulatory changes and economic downturns added complexity to cross-border supply chains. Financial strain emphasized the importance of robust risk management, leading to a renewed focus on building resilient and agile supply chains. Businesses now invest in technology, diversify suppliers, and reassess inventory strategies.

Intelligent software enhances decision-making and risk management, facilitating collaboration throughout the supply chain. For instance, during sudden demand changes due to lockdowns, the software swiftly analyzes data, enabling real-time adjustments to inventory, production, and distribution. This adaptability ensures a responsive and agile supply chain, surpassing traditional approaches for efficiency and customer satisfaction.

The promise of intelligent software

In the current technological realm, intelligent software signifies more than just automation; it melds advanced algorithms, artificial intelligence, and machine learning to emulate human cognitive abilities. Unlike its conventional counterparts, this software learns, adapts, and autonomously recommends actions, excelling in data analysis and trend prediction. Its continuous adaptation based on feedback refines its performance over time.

How intelligent software could make a difference in specific situations

1. Demand volatility amidst global events.

The COVID-19 pandemic triggered significant demand shifts, straining supply chains. Intelligent software, with real-time analytics, could have monitored consumer behaviors, identified disruptions, and gauged inventory levels. Such insights would have refined demand forecasts, allowing organizations to adjust production and prioritize shipments, mitigating stockout risks and excess inventory costs.

2. Supply chain disruptions due to geopolitical tensions.

Geopolitical uncertainties can disrupt supply chains. Intelligent software could pre-emptively identify vulnerabilities, highlighting dependencies on specific regions or suppliers. Through simulations and alternative sourcing evaluations, it would have enabled organizations to devise resilient strategies, ensuring uninterrupted operations amid external disruptions.

3. Quality control and recall management.

Product recalls pose financial and reputational risks. Intelligent software, with advanced analytics, monitors production for deviations from quality standards. Using predictive analytics, it could anticipate issues, facilitating timely interventions, minimizing recall extents, and preserving brand reputation.

4. Transportation and logistics optimization.

Efficient transportation is crucial for supply chain success. Intelligent software, leveraging predictive analytics, would analyze factors like traffic and weather to optimize transportation strategies. This would reduce delays, enhance resource use, and boost supply chain effectiveness.

5. Inventory management in seasonal industries.

Seasonal industries face inventory challenges due to fluctuating demand and product perishability. Intelligent software, utilizing machine learning, analyzes sales trends and market dynamics to offer precise demand forecasts and inventory recommendations. This ensures optimal inventory levels, reduces holding costs, and capitalizes on market opportunities.

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Autoliv’s Supply Chain Risk Management Journey

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Autoliv’s Supply Chain Risk Management Journey

Autoliv’s Supply Chain Risk Management Journey

In February, Klaus Niebur, the director of global supply chain risk management at Autoliv, and Jan Thiessen, the managing director at targetP!, spoke on best practices on supply chain risk management at ARC Advisory Group’s Digital Transformation in Industry conference.

Autoliv is the world’s largest safety system supplier in automotive industry. This global, Tier 1 manufacturer is headquartered in Stockholm and had revenues of over $8 billion last year. It supplies airbags, seatbelts, and steering wheels to most of the Automotive OEMs – companies like Renault/Nissan, Volkswagen, etc. targetP!, in turn, is a boutique procurement consultancy.

Autoliv’s Continuing Journey in Supply Chain Risk Management

Mr. Niebur’s and Thiessen’s presentation was taped in November of 2021 and then played online in February. At the time we spoke, Mr. Niebur spoke of risk management as a continuous improvement journey that would never end. There were several things they were looking to accomplish in the near term. I wanted to circle back to Klaus and Jan and get caught up on their journey.

Steve: Klaus, when we talked, you mentioned Autoliv was already doing digital supplier management, had digital sourcing solutions, and was looking at real-time transportation visibility solutions to provide better predicted times of arrival for inbound and outbound shipments. In short, this risk management solution needed to integrate into your IT ecosystem. Your future vision was for risk management to be seamlessly integrated into an advanced control tower. Can you talk about how this journey is going?

Klaus: This is correct and it is still our goal to create this Control Tower. It will link all initiatives within the supply chain function and be enabled by our digital solutions and all data sources. And we are making progress.

Read more Autoliv’s Supply Chain Risk Management Journey

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What is Financial Risk Management and Why Study It?

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What is Financial Risk Management and Why Study It?

Every business, regardless of size, deals with some degree of risk. There are several variables to consider for every decision involving finance, and a certain amount of risk can never be avoided. But it can certainly be mitigated. As such, companies are increasingly looking to specialists in the field for expert evaluations to help make decisions that directly impact a business’ revenue. Read more about financial risk management and why it’s a promising career…

What is financial risk management?

Every investment comes with potential risks. In fact, there is no profit without risk. Contrary to what we are used to, risks in finance can be positive as well as negative. In short, a risk is any deviation from the expected outcome. Risk management is the necessary step of evaluating possible outcomes, analyzing potential gains and losses, and deciding on what action should be taken (or not) given the conclusions from the evaluation.

Why study it?

A 2019 report by Accenture indicated that new investment risks are emerging with unprecedented speed. The top three new challenges appointed by specialists were disruptive technology, data breaches, and operational risks. Moreover, climate change has become a factor to be considered as property, infrastructure, and land damage pose new challenges.

Sustainable economy

While some may believe financial risk pertains only to high-ranking CEOs and investors, it’s essential to understand how it affects everyone. A country’s population is entirely interconnected through its financial system, and poor financial decisions can lead to an unreliable market and a declining economy. Having a reliable financial market means a stable and sustainable economy, in which everyone will benefit from better living conditions.

Solve climate change risks

As mentioned, the reality of climate change can affect businesses and investments in many ways. Besides the physical risks of property damage, business disruption, and the need for relocation, factors like technological transition and policy changes need to be considered in a risk analysis.

Cybersecurity

Cyber risk is the number one threat to the global financial system, says U.S. Federal Reserve Chairman Jerome Powell. Financial institutions are prime targets for cyberattacks, and sector leaders have appointed cyber security to be at the top of their priorities, rising above every other potential risk. Risk managers need to develop strategies to effectively deal with the cyber threat in a world that relies on technology to keep the global economy afloat.

Cryptocurrencies

The recent boom in cryptocurrency assets can directly affect the overall financial system. A report by the Financial Stability Board has highlighted vulnerabilities in the crypto market, such as linkages with the regulated financial system, liquidity mismatch, and credit and operational risks. Blockchain intelligence companies have invested in risk management technology, but this remains a sector that will need to be followed closely as it further develops.

Geopolitics

Not many companies fully consider how geopolitics involves a variety of financial risks. Access to natural resources, proximity to countries in conflict, limits on foreign relations, corruption, and local culture are just some factors to consider in a risk analysis. Each location provides a particular financial scenario, and only by fully understanding this context can a business use it to its advantage.

Work opportunities

A specialized professional in financial risk management is necessary for every business. Many companies hire consultants or teams to anticipate exposure, quantify the risk, and plan mitigation strategies. As a risk specialist, you can work in sales, trading, marketing, banking, and many other sectors, while benefiting from the increasing demand for qualified professionals in the field.

Read more at What is Financial Risk Management and Why Study It?

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Risk,BI,Performance: Supply Chain Management

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Risk, BI, and Performance Management in the Context of Supply and Demand Chain

Supply Chain Institute, Article one – Risk Management

Greetings:


If I may, let me start my journey on this subject with some meaningful quotes from many greats:


“The person who risks nothing, does nothing, has nothing, is nothing, and becomes nothing. He may avoid suffering and sorrow, but he simply cannot learn and feel and change and grow and love and live.”

Leo F. Buscaglia quotes(American guru, tireless advocate of the power of love, 1924-1998)

“Man cannot discover new oceans unless he has the courage to lose sight of the shore.”

Andre Gide quotes (French writer, humanist and moralist, 1947 Nobel prize for literature, 1869–1951)

“Often the difference between a successful person and a failure is not one has better abilities or ideas, but the courage that one has to bet on one’s ideas, to take a calculated risk – and to act.”

Andre Malraux quotes (FrenchHistorian, Novelist and Statesman, 1901–1976)

“He who risks and fails can be forgiven. He who never risks and never fails is a failure in his whole being.”

Paul Tillich quotes (German born AmericanTheologian and Philosopher, whose discussions of God and faith illuminated and bound together the realms of traditional Christianity and modern culture. 1886–1965)

“Only those who will risk going too far can possibly find out how far one can go.”

T.S. Eliot quotes (American born English Editor, Playwright, Poet and Critic, 1888–1965)

Continue reading →

What is the most crucial goal for supply chains?

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What is the most crucial goal for supply chains?

One of the driving forces behind the expansion of business relationships is a mindful effort to reduce risk. This is particularly true in supply chains.

To be sure, the pursuit for lower-cost materials and more efficient logistics are very important to industries of all kinds today. But reliability of supply and precautionary redundancy have prompted firms in industries ranging from basic materials like steel and chemicals to high technology, to establish supply networks across the globe.

Ironically, it’s likely that in going global, companies have not actually decreased their risk profile but actually increased it. Broadening exposures can actually drive total risk higher, either by actual exposure to new perils or simply by making existing risks more difficult to quantify or manage.

That is especially true of global supply chains, through which goods or services often come from countries with low per-capita income, weak regulatory control or where the quality of risk management practices—as well as building codes and standards—are weak or nonexistent. In several memorable cases, retail chains and clothing brands have had to respond to fires and collapses of the factories making their garments on the other side of the planet.

Even the industrialized world is not immune to global risks, as was proven by the earthquake and tsunami in Japan in 2011. Automobiles, car parts, electronics, and many other sectors saw their supply chains disrupted for weeks or even months, prompting them afterward to geographically diversify their sourcing, production and inventory.

What is the most crucial goal for supply chains in your opinion? Share with us in the comment below or send us message for discussion. Subscribe now to get updates in your inbox.

 

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Step by Step Supply Chain Risk Management

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Supply Chain Risk Management Step by Step

Managing risk in the supply chain can be a daunting task. Supply chain managers increasingly realize that protecting their supply chains from serious and costly disruptions. But often they don’t take action, because they are paralyzed by not really knowing how to start.

Zurich’s 2014 Supply Chain Resilience Survey puts some figures on the problem:

  • 73.5% of organizations surveyed said they do not have full visibility into their supply chains.
  • 76% of respondents reported at least one instance of supply chain disruption last year.
  • 44.4% of disruptions originate below Tier 1 suppliers.
  • Loss of productivity (58.5%), increased cost of working (47.5%), and loss of revenue (44.7%) were the most commonly reported consequences of supply chain disruptions.
  • 28.6% reported low mangement commitment to the issue of supply chain resilience.

Taking a step-by-step approach can help. Solid planning, carefully planned and executed, not only reduces risk but also can increase supply chain efficiency, enhancing the organization’s bottom line.

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Counter-measure Offers Cyber Protection for Supply Chains

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Counter-measure Offers Cyber Protection for Supply Chains

The supply chain is ground zero for several recent cyber breaches. Hackers, for example, prey on vendors that have remote access to a larger company’s global IT systems, software and networks. In the 2013 Target breach, the attacker infiltrated a vulnerable link: a refrigeration system supplier connected to the retailer’s IT system.

A counter-measure, via a user-ready online portal, has been developed by researchers in the Supply Chain Management Center at the University of Maryland’s Robert H. Smith School of Business.

The CyberChain portal is based on a new management science called “cyber supply chain risk management.” It combines conventionally-separate disciplines cybersecurity, enterprise risk management and supply chain management.

Funded by the National Institute of Standards and Technology, the UMD researchers developed the formula, in part, after surveying 200 different-sized companies in various industries.

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Is Your Money Safe? Risk Management Blindspots That Cost Investors Dearly

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Is Your Money Safe? Risk Management Blindspots That Cost Investors Dearly

Both retail and institutional investors who have survived one or more economic recessions have learned that they cannot select their money managers solely on a demonstrated stream of at or above benchmark returns and that they need to include the underlying risk of their investment portfolio in the formula that calculates expected future value. However, the risk denominator in portfolio management analytics may be underestimated or misestimated because of the following three industry problems:

1. The traditional view of risk is disaggregated

The traditional view segregates risk into market, credit and operational.

2. Regulators are approaching the industry reactively

Significant regulatory tightening ensued after the 2008 mortgage crisis.

3. Operational risks is not adequately represented

To manage market risk better, most investors are well aware of basic portfolio hygiene principles including the value of diversification, the importance of looking at volatility driven asset correlation, rebalancing, the criticality of subtracting leverage when assessing quality alpha, the value of protecting for inflation through IL bonds or inflation-hedging assets such as real estate.

 

How can investors make safer investments?

What could investors do in an environment of confusing regulatory requirements and limited transparency around operational risk? For starters, Investors can raise their awareness and employ alternatives to address the information asymmetry in the following ways:

1. Select asset managers that demonstrate commitment to operational risk management

Certainly some asset managers understand and are willing to invest in operational excellence and risk management.

2. Look for business partners that can help

Whenever there are potential gaps, new business models emerge and the industry evolves.

3. Improve your investment due-diligence process

Investors are in the best position to demand greater transparency and accountability from money managers and one way to do that is to raise the standards of due-diligence.

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The Higher Stocks Go, The More Important Risk Management Becomes

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The Higher Stocks Go, The More Important Risk Management Becomes

Summary

  • With “new high” showing up in market reports on a frequent basis, it is prudent to nail down equity risk management plans.
  • Economic and central bank signals are quite a bit different in the United States and Europe, making seat of the pants allocation decisions more difficult.
  • Rising inflation in the United States could bring correction/bear market plans into play in the coming months.

Financial Markets Are Complex Organisms

Just as the human brain is an extremely complex organ, the financial markets have an almost infinite number of factors that ultimately determine the value of our investment portfolios. Therefore, it is unlikely that “figuring it out as we go along” will produce favorable investment outcomes. In the present day, there are numerous and somewhat conflicting signals. On the bullish end of the spectrum, growth in the United States appears to be picking up and the Fed has been extremely accommodative. However, the economic bears can point to low inflation in Europe (fear of deflation) and rising prices in the United States that may force the Fed’s hand.

Investors Need A Consistent Approach

While we are not brain surgeons, our guess is that surgery involves somewhat of a “flow chart” or “if, then” approach. For example, if bleeding needs to be contained, then there are specific steps to address the unfavorable situation. An investment risk management plan works in a similar manner by having specific and executable strategies that follow an “if the market does this, then we will do this” script. A recent bullish example surfaced on June 8 as observable evidence began to surface in equities favor. The evidence allowed for a prudent “bump up” to the growth side (SPY) of our portfolios.

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Retirement planning: How not to outlive your money

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Retirement planning: How not to outlive your money

Retirement is ultimately an exercise in risk management – and dealing with risk involves an educated understanding of how unforeseen events can sabotage your golden years.

The greatest single hazard is what planners call “longevity risk” – the possibility that you may outlive your money.

Actuaries tell us that a woman who is now 65 can expect to live, on average, to 88, while a man can look forward to reaching nearly 86. Remember, though, that those are averages – about half of retirees will outlive those figures. In fact, if you are now a 50-year-old woman, there is nearly a 10 per cent chance that you will live to celebrate your 100th birthday.

How do you plan for a retirement that may be as long, or longer, than your working life? For the dwindling number of Canadians who are members of defined-benefit plans with automatic cost-of-living adjustments, there’s little to worry about. For most of us, though, there is a lot of risk in planning three decades ahead – especially given two additional hazards.

A good retirement plan should address longevity risk, inflation risk and market risk. Here are the pros and cons of three key risk-management tools:

Annuities

An annuity is essentially a contract with an insurance company, which guarantees to pay you a steady stream of income until the day you die.

Work

Taking a part-time job in the early years of your retirement can make a big difference to your financial picture. Earning even $4,000 a year replaces the income you could reasonably expect to generate from a $100,000 portfolio. It also provides a buffer against unexpected inflation.

Your portfolioare

Many people can achieve big gains from simply adjusting their portfolios to reduce the cost of investing and to ensure the right mix between income producers (like bonds) and more inflation-proof investments (like stocks).

The bottom line

It all sounds very intimidating – but doesn’t have to be. Despite their challenges, Uncle Jim and Aunt Mary never complained, but simply found ways to live on less.

How do you plan your retirement? Do you find this article useful? If yes, welcome to share it or you can leave comments if you have opinions. You may also send us a message for discussion.

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