More than 50% of business leaders say the risks of global supply chains now outweigh the benefits

BDO’s latest Global Risk Landscape report reveals that more than two years on from the first round of COVID-19 lockdowns, businesses continue to experience supply chain challenges. Further to this, there are new challenges on the horizon that will impact supply chains for years to come.

Of the 500 C-suite executives BDO surveyed across Australia, Asia Pacific, Europe, the Middle East, Africa and the Americas, almost half said their supply chains have been severely impacted over the last 18 months. Fifty two per cent of respondents agreed that the risks of large complex global supply chains now outweigh the benefits.

Marita Corbett, National Leader for Risk Advisory at BDO Australia, said the new data builds a case for localised and shorter supply chains, running multiple smaller manufacturing plants rather than one large site, and using more than one supplier.

“We are seeing companies here in Australia, and across the globe, taking these steps to boost the resilience of their supply chains. However, we must acknowledge these measures are expensive, which further increases costs along the supply chain and for consumers,” Marita said.

The new survey shows that 59 per cent of respondents have created alternate supply chains as a back-up, and that 23 per cent intend to do so over the next 18 months.

Marita said the reassessment and overhaul of supply chains many companies are undergoing comes at a time when consumers are calling for greener, lower-mileage and more transparent supply chains, creating an opportunity for companies to use the disruption for long-term advantage.

The survey reveals 47 per cent of respondents listed supply chain transparency among their top business priorities.

“There are two major risks caused by lack of transparency in supply chains. Firstly, there’s the growing reputational risk when a company cannot meet the high ethical standards demanded by consumers. And secondly, there’s a significant financial risk when a company doesn’t understand the regional challenges faced by their suppliers,” Marita said.

“Improved transparency at every level of the supply chain will go a long way to minimise these risks,” she said.

Marita added that having a risk expert at the C-suite level also plays a huge role in mitigating risk, but only 60 per cent of leaders surveyed had a risk expert in their upper ranks.

“The benefits of having a risk expert in your C-suite are wide-ranging, from investing in the right technology to provide transparency, traceability and visibility, to supporting your company’s sustainability goals,” Marita said.

She said the survey highlighted that supply chain analytics technology was being implemented by companies globally, with 40 per cent of companies investing in this technology over the past 12 months.

“Right now companies are facing over-lapping supply chain challenges from tensions and sanctions from the war in Ukraine, skills shortages and also climate change – and some of these challenges are very hard to control or predict,” she said.

“Our survey has revealed that companies are placing a stronger focus on resilient supply chains over efficient supply chains, with 60 per cent of business leaders from Australia and the Asia Pacific region saying their focus is now on resilience over efficiency.”

Marita said climate change, and its impact on supply chains, should be at the top of the risk agenda for business leaders, but it’s not. The survey revealed that only 22 per cent of leaders ranked climate change and natural disasters as a high priority risk, and only 23 per cent said it would pose a significant risk to their business in 5 years’ time.

“Despite all the challenges companies faced due to the COVID-19 pandemic, there is a real lack of preparedness for future pressures, a lot of which will come from natural and climate disasters such as rising coastal tides, extreme rainfall, floods and fire. These events will impact any company that has supply chains crossing international borders,” Marita said.

Of the business leaders surveyed, 62 per cent said they had started to put plans in place to protect their supply chains from climate change, 24 per cent said they have no plans in place, and 14 per cent already have plans in place.

“With global uncertainty set to continue, and consumers demanding ethical and sustainable supplier arrangements, the case for resilient and transparent supply chains being managed by risk experts is stronger that ever. Companies that prioritise resilient and sustainable supply chains will have a clear advantage in the years to come,” Marita said.

Find the Global Risk Landscape Report and exclusive APAC white paper here.