This was originally published on the GlobalRisk Community website http://globalriskcommunity.com. by Michael C. Thomsett.

This, of course, is the ever-present challenge for all risk managers. If a risk is unthinkable, how do you plan for it, mitigate it, or prevent it?

     For example, a global pandemic not only causes widespread death but shuts down the supply chain and bypasses all risk management efforts and programs. To make matters worse than the mortality issues, the risks of civil unrest and shortages of food, water, and energy could lead to many more deaths than the pandemic itself. The whole problem and its scope of challenges is simply unthinkable.

     Solutions are available. It's a matter of diversification and control. Anyone trying to manage risk in a global supply chain knows that a singular chain is by definition full of risk. Any number of events could and would disrupt and shut down that supply chain. Solutions include the three D's:

 

     1) De-globalization: One of the greatest problems for SCRM is the geographical extent of the supply chain itself. By shrinking that chain and moving supplies and manufacturers closer to home, many of the inherent global risks shrink along with the size of the supply chain.

 

     2) Diversification: Why rely on a single manufacturer or supplier? This itself is an unacceptable risk. By employing two, three or four suppliers in different regions, you avoid many of the global risks and secondary exposure, including pandemic (where borders are closed, possibly for an extended period, for example).

 

     3) Dissemination: Open up the discussion among your own suppliers. When organizations do this, they get more intelligence that they can get elsewhere. For example, most participatns in tyhe supply chain are likely to assume that "someone else" has already planned for risk and taken the necessary steps. Secondly, you will discover m ore great ideas from participants in the supply chain. Finally, you will discover aspects of the unthinkable risk that -- once opened up for dialogue -- become thinkable, and that is how solutions are developed.

 

This is not to suggest that soltuions are easy or simple; they are not. But analyzing the problem with disciplies of business management and investment common sense are at least starting points to reduce the impact of what today is an unthinkable loss.

 

Thomsett is an author and speaker specializing in business and investing topics. His paper, "Global Supply Chain Risk Management: Vioewing the Past to Manage Today's Risks from an Historical Perspective" was presented in December, 2010 at the IntellectBase International Consortium. The paper was then selected for publication in the journal "Review of Management Innovation and Creativity" (February 2011 issue, Vol. 4, Issue 9)

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