Manufacturers lack plans for risk management

A recent survey of European mid-sized manufacturing and automotive companies suggests that firms are lacking formal plans for high impact strategic and operational risk, such as supply chain risk or customer trends. Financial and insurance services firm Marsh conducted the survey earlier this year. 90 companies were interviewed out of a sample of 600, all generating annual revenues of between eur50m and eur500m, with between 50 and 500 employees across six countries: the UK, Italy, France, Belgium, Germany and Spain. The results showed that 40% of companies lacked formal plans for high impact risk, despite 71% saying that managing risk was a key priority for management. But the survey also indicated that Boards of directors are beginning to look beyond traditional financial risk management towards operational and strategic risk management, including the supply chain. The top three concerns amongst those surveyed also produced some interesting results. 70% cited increased competition as their number one risk – no surprises there then. 66% said that commodity price fluctuation was their next major concern, followed by supply chain failure (64%). David Harvey, leader of the manufacturing and automotive practice at Marsh, comments: “Outsourcing is increasingly utilised as a key tool for keeping costs down in today’s global market, but is only truly effective if manufacturers manage the risks inherent in their supply chain. It is vital to coordinate production and delivery between suppliers, clients, retailers and distributors.” The survey also found that only 5% of manufacturing firms currently have a dedicated CRO (chief risk officer), whilst 71% said that the CFO (chief financial officer) was responsible for managing and mitigating corporate risk in addition to his or her financial duties.