Pandemic drove significant demand for supplier risk analysis in 2020 according to The Smart Cube

The Smart Cube, a global provider of strategic research and analytics solutions, has reported unprecedented demand from companies seeking to better understand their global supply chain risk exposures in the last 12 months. Compared to 2019, the company saw a 167% increase in supplier risk-related inquiries in 2020. And so far, 2021 has seen a continued upsurge in demand for these services.

“The pandemic made ‘supply chain’ a household term,” said Omer Abdullah, MD and Co-Founder of The Smart Cube. “Never before have businesses and consumers alike suffered so acutely at the hands of a severely disrupted global supply chain. As a result, businesses have been given an urgent wake up call to gain greater visibility into the risks associated with a globalised supplier base. However, as customers tell us, it’s not just the pandemic driving their inquiries.”

The global pandemic has illuminated many critical issues within the supply chain, forcing companies to rethink how they evaluate their end-to-end supply chain and all of the suppliers they ultimately rely on. It’s no longer enough to evaluate first tier suppliers from a risk perspective. Companies must review the entire supply chain and understand risk associated with their end-to-end supplier network, including second, third, and fourth-tier suppliers, as well as types of risk going beyond purely financial stability such as operational, compliance, strategic and geographic risks associated with suppliers.

Beyond pandemic-related disruption, The Smart Cube noted two other primary considerations that are arising as companies look to set up, revise or reset their risk management programs:

Digital transformation

Procurement is increasingly working to digitise operations as data volumes continue to grow, and to capitalise on untapped cost savings and risk management opportunities. A Deloitte study of global CPOs found that digital transformation significantly grew in importance, increasing 20% since 2019. This year, 48% of CPOs consider digital transformation a strong priority. From a risk management perspective, this means companies want to access risk intelligence in near-real-time, in a digital format.

Environmental, Social and Governance (ESG):
The United States Securities and Exchange Commission (SEC) has signaled the potential for requiring enhanced ESG reporting by publicly listed companies. This, combined with evolving consumer demands, concerns related to the environment and global labor practices, and other factors, is driving businesses and their procurement organisations to look outside of their four walls and re-evaluate suppliers from an ESG perspective. Their own ethical standards — and brand reputation — are on the line.

“What we’ve seen over the past year, and especially the last several months, is a general awakening among CEOs and business leaders to the bottom line impact of the supply chain,” said Abdullah. “During the pandemic, procurement has affirmed its role as a key business value driver for organisations of all types, and business leaders are responding accordingly.”

The Smart Cube expects the trend toward careful supply chain risk evaluation to continue for the foreseeable future as companies work to re-evaluate their supply chains to meet the new need associated with ongoing market volatility.

For businesses with a large supplier base and complex supply chains, managing third-party supplier risk is a major challenge. The Smart Cube can help proactively identify, monitor and mitigate third-party supplier risk to ensure business continuity and meet compliance and sustainability goals.