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Supply chain disruption biggest corprate risk: study


September 13, 2005   by Canadian Underwriter


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Financial executives at the world’s top companies believe supply chain risks pose the top threat to companies’ revenue, according to a FM Global study.
At the same time, close to half of all respondents in the study said risks associated with globalization and outsourcing are only a low priority or concern for their organizations, potentially leaving their supply chains vulnerable.
The study, “Managing Business Risk in 2006 and Beyond,” contains the perspectives of more than 600 financial executives, including CFOs and treasurers the majority of whom work for companies with at least US$1 billion or more in annual revenue.
FM Global, a commercial property insurer, commissioned market research firm Harris Interactive to conduct the study.
The study also finds that:
– The most prevailing emerging risk cited by companies worldwide is “governmental or regulatory” outpacing even “competition,” which ranked second.
– North America-based companies are roughly twice as likely as their overseas counterparts to cite “insufficient time,” “inadequate personnel” and “insufficient budgets” as the biggest obstacles to addressing top risks.
– On average, respondents indicate the majority of their risk management budgets are allocated to risk control (loss prevention) rather than risk transfer (buying insurance).
– Recent corporate governance reforms have increased companies’ focus on risk management either moderately to highly at 88 percent of North America-based companies surveyed, as well as at 78 percent of companies based overseas.
According to Ruud Bosman, executive vice president of FM Global, the results provide informative insight regarding how financial executives perceive and address their risks in an environment where increasing levels of personal accountability are placed on them for the successes or failures of their enterprises. These pressures are compounded by heightened and near-constant pressure from investors, regulators, customers and competitors.