Managing Supply Chain Risk in Asia-Pacific

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Businesses need to be prepared for the risks of doing business in Asia-Pacific. Picture Credit: istockphoto 

Risk is inevitable wherever businesses operate. But the threats can vary from market to market and it is often difficult to foresee hazards. According to the Allianz Risk Barometer 2014, Asia-Pacific companies see business interruption and supply chain risk as the biggest hazard they will face this year, with 46% of firms citing this as their top concern. Natural catastrophes, regulatory change and cybercrime also made the top ten, all factors, which can have ripple effects throughout supply chains.
These networks are becoming more complex and the stakes are reaching ever higher - firms know that disruption in one supplier can affect others and in a worst case scenario, the delivery of goods and services and be slowed or even halted. Flooding in Thailand in 2011 hit the supply chains of companies like Toyota and Apple, and a 2012 policy brief from the Asia-Pacific Research and Training Network on Trade shows that the automotive industry contracted by 87% between September and November 2011.

Companies are looking for ways to manage these hazards and Corporate Cards can contribute to strong risk management strategies that mitigate damage and offer protection in the event of supplier difficulty.

Mapping and Strategy
Companies are becoming more aware of the risks they face and are putting risk management front and centre in their plans for growth. Deloitte’s 2013 Exploring Strategic Risk survey found that 96% of Asia-Pacific businesses changed their approach to strategic risk management in the past three years and globally, firms are increasingly integrating it into their business strategies and planning processes. Supply chain management is an important element in any business model and companies need to be aware of where the most significant risks lie.

Mapping supply chains is an important method of identifying where specific risks are highest. Thorough analysis can shed light on the suppliers most likely to be affected by political instability and currency fluctuations, as well as changing regulations, cyberattacks, environmental hazards and financial difficulties, all of which could disrupt the flow of goods and services. From there businesses can work alongside strategic suppliers to improve their internal processes and boost their resilience to strengthen the supply chain as a whole.

Preserve Cash Flow
The Economist Intelligence Unit’s 2013 Strategies for managing customer and supplier risks report shows that businesses worldwide are aware of the hazards within their supply chains. Some 58% said it was at least somewhat likely that a supplier would fail to meet their obligations in terms of either quality or volume, while half said the same of production problems causing supply chain disruption. Meanwhile 38% confirmed the likelihood of business continuity being lost as a result of a supplier’s financial problems. Data security and corruption are also constant worries, with 30% saying it was likely that a supplier would be affected by an IT security breach and a quarter even fearing legal risks thanks to fraud or other crime.

It is vital that businesses adopt processes that will afford them protection in the event of these breaches. Corporate Cards can contribute to a risk management strategy in several ways. For example, without punctual deliveries from suppliers it can be difficult for many firms, especially in retail, to raise the funds needed to maintain cash flow and pay their other suppliers. An Amex account affords firms 51 credit-free days on every purchase, meaning they can pay suppliers promptly and make the most of extra time to pay their bill.

Protect Against Financial and Data Loss
Fraud and data security are significant risks, and losing the right information can result in large financial and reputational losses. The Verizon 2013 Data Breach Investigations Report found that more than half of all data security breaches involved some form of hacking, while a striking three-quarters involved users intruding onto networks having stolen or exploited weak credentials. Threats can come from anywhere at any time and it is important that if a supplier falls victim to a cyberattack, businesses that buy from them are not in automatic jeopardy.

To an extent some of these risks are inevitable, but a Corporate Card system can help to protect companies from financial and data losses as a result of breaches among suppliers. Comprehensive data captured from every transaction in almost real time provides maximum visibility so that transactions can be traced and monitored and suspicious purchases spotted almost immediately. Moreover, Amex’s Fraud Protection Guarantee ensures that any transactions proven to be fraudulent will not lead to financial loss for the account holder.

But significantly, adopting a Corporate Card regime can lead to added value throughout the supply chain. Through Supplier Enablement, firms can work directly with the businesses in their supply chains to improve their internal processes and where necessary, prepare them to upgrade from paper-based processes to more secure ePayments. As well as minimising the risk from data breaches, these collaborative relationships with suppliers can help to prevent them.