Risk Mitigation And Financing In Supply Chain System

Risk mitigation and financing are two critical aspects of supply chain management. Mitigating supply chain risk involves identifying, assessing, and prioritizing risks that could disrupt the supply chain and developing strategies to manage them. Financing, on the other hand, involves ensuring that the supply chain has adequate funding to operate efficiently.

According to a recent article by BCG, collaboration and digital technology are the keys to overcoming the main challenges of supply chain risk management . Establishing transparency across sub-tiers, prioritizing risks for tracking, developing algorithms for real-time risk prediction, and embedding the risk management function widely within the organization are some of the critical steps in mitigating supply chain risk . The procurement function plays a pivotal role in supply chain risk management. Its main activities—selecting vendors, sourcing the company’s inputs, and managing the upstream supply chain—directly affect the company’s risk exposure .

Effective procurement function must closely collaborate with the company’s risk management and business units. An effective procurement function must closely collaborate with the company’s risk management and business units, often taking the lead in risk mitigation efforts. To do these well, it must use up-to-date digital technology, including AI .

Financing is another critical aspect of supply chain management. It involves ensuring that the supply chain has adequate funding to operate efficiently. According to Deloitte, financial risk assessment in taking on new suppliers whether through ‘sole-source’ procurement or competitive bidding process is one of the key steps in mitigating financial risks in corporate value chains .

In summary, mitigating supply chain risks and ensuring adequate financing are two critical aspects of supply chain management that require close collaboration between procurement function, risk management, and business units. Employing cutting-edge digital tools such as AI can help mitigate risks effectively.