NU Online News Service

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Risk management executives know that protecting their company'ssupply-chain is important, but many fail to properly manage therisk to it, according to a recent survey.

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The findings, released by the Economist Intelligence Unit andsponsored by Zurich Switzerland-based insurer ACE, followed a pollof 500 global executives with responsibility for riskmanagement.

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Titled "Managing Supply-Chain Risk for Reward," the studyreported that while many companies are developing strategies toboost the efficiency and the resilience of their supply chain theystill struggle to find effective answers to managing the risksassociated with suppliers.

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Two thirds of those surveyed said they were initiating riskassessments of key suppliers while over half said they were workingto improve collaboration with their partners and suppliers.

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Phil Wall, senior account engineer for ACE said in a statementthat the survey's findings are underscored by the Confederation ofBritish Industry calling for businesses to "re-organize andre-examine" their business supply relationships to avoid a "dominoeffect" of supply chain failures.

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"Bearing this in mind, the findings of this latest EIU study areencouraging. It's good to see many companies actively working onstrategies to boost the resilience of their supply-chains and makethem more cost-effective and efficient," he said.

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"However, it's not all good news and we are concerned that manybusinesses aren't considering supply-chain risk as strategicallyimportant and they aren't developing the expertise to deal withit," he continued. "We would urge all companies to take this vitalarea of their business seriously; supply chain risks should not beignored."

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ACE said more than half of the respondents were affected byrising input costs and swings in energy prices, while a third saidthat the insolvency of partners or suppliers had causeddisruption.

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Sixty-two percent of those questioned cited the inability topredict future demand for their products as a major issue and 59percent said they had been adversely affected by exchange ratefluctuations.

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Close to 40 percent of respondents saw continuing unfavorableexchange rates as the key concern for their supply-chains in 2010.This was followed closely by fears over input price increases andenergy price hikes.

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Declining customer confidence, the introduction of protectionistmeasures by governments and further supplier insolvencies were alsoviewed as challenges.

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Addressing these issues the majority of respondents said theirorganizations were taking significant steps to increase theresilience of their supply-chain.

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Improving the efficiency of their supply-chains is also apriority. In an effort to contain costs, over 57 percent reportedthat they had negotiated lower prices from suppliers over the lastyear and over a third claimed to have sought increased efficiencyfrom their logistics and increased their reliance on outsourcing.Over a third planned to move from single to multiple suppliers.

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ACE said that while these tactical measures are welcome steps inthe right direction, the survey strongly indicated that manycompanies may still fail to appreciate the potential impact ofrisks to their supply-chain.

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A copy of the report is available at www.aceeuropeangroup.com.

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