Author: Michael Rasmussen, GRC Analyst & Pundit at GRC 20/20 Research, LLC

 

ESG and the Geopolitical Complexities of Supplier Risk

 

How do you define the modern organization? 

 

There is no binary boundary to the organization anymore, no more black and white. It is impossible to clearly state that this is where the organization ends. The organization is NO LONGER defined by brick-and-mortar walls and traditional employees. There are shades of grey as the modern organization is the extended enterprise that involves layers of complex nested-supplier and subcontracting relationships. 

 

The distributed nature of business across extended third-party and nth-party relationships is the new reality. Managing risk in this paradigm is challenging. However, given the new complexities of ESG risks and the volatile world of geopolitical risks has a compounding exponential risk exposure that many organizations are not prepared for. 

 

For organizations of all sizes and industries, this poses a huge challenge but also a huge opportunity.

 

1.      Organizations that fail to manage the complexities of supplier risk in modern business in the context of ESG and geopolitical disruptions will find themselves in a world of hurt and risk exposure that drags them down to failure.

2.      Organizations that embrace and manage these complexities of supplier risk in the ESG and geopolitical risk will find they are more agile and can outpace their competitors to achieve greater value through these relationships and to the organization.

 

Risk in a supplier risk context requires more than resiliency. Resilience is critical, but agility is what is needed for 360° supplier situational risk awareness so the organization can prepare for, minimize, avoid, or even leverage risks to greater value and return for the organization. 

 

1.      Resilience is the ability to recover from supplier disruptions and risk events. That is critically needed, no one will argue that. If we have a supplier risk event, we need to address it, contain it, and recover from it as quickly as possible. 

2.      Agility, however, is the ability to see what is coming at the organization and its supply chain on the horizon. To see what is being forecast, what is developing, and the scenarios it can play out on individual suppliers as well as the whole extended enterprise supply chain.

 

U.S. President Theodore Roosevelt stated, “Risk is like fire: If controlled it will help you; if uncontrolled, it will rise up and destroy you.” In a supplier risk context, faced with growing ESG risks and geopolitical risk, it is essential for organizations to leverage risk to their advantage, to make a robust supplier risk management program a competitive differentiator to enable and equip the organization trying to navigate chaos in an extended enterprise of disruption. 

 

This requires that organizations have the intelligence and insight into their suppliers’ operational aspects and what is developing on the horizon. This cannot be done in manual processes encumbered by thousands of documents, spreadsheets, and emails.

 

Organizations need real-time insight into their suppliers and the trending intelligence sources of third-party risk in an ESG and geopolitical context. Technology that brings together processes, workflow, tasks, assessments, and engagement with suppliers as well as third-party risk intelligence sources. Technology that not only delivers third-party resilience but third-party risk agility in and across the extended enterprise.

 

Join Paul Johns from Ethixbase and me as we discuss these topics on October 25 at 10am ET – register here.

 

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