Business executives are not evolving to keep ahead of thecomplex and increasing risks across their global supply chains, aZurich survey finds.

In its fifth annual Supply Chain Resilience Survey released this month, Zurichpolled 519 members of the Business Continuity Institute—includingrisk and supply-chain managers, and business continuity, securityand emergency-planning professionals—about their response to thechallenge of running smooth global business operations.

The survey finds that three-quarters of business specialists donot have a clear understanding of their organization's supply-chaindisruption experiences, and only a quarter are coordinating andreporting across their enterprise to gain it. Moreover, 50% sayhalf or more of their suppliers do not have abusiness-continuity plan in place.

This level of unpreparedness has remained unchanged from2012.

“Results in 2013 continue to indicate a passive approach toreviewing the likely effectiveness of supplier business-continuityarrangements,” states the report, which goes on to say thatsupply-chain resilience is a complicated issue that is “not justabout continuity.”

While supply-chain disruptions are increasing—over the past fouryears, 75% of respondents annually experienced at least oneincident—they are also occurring further inside the supplychain. Forty-two percent of business interruptionsoriginated below the tier-one supplier (supplying parts to themanufacturer of the final product) in 2013.

The top-three causes of disruption occurred from unplanned IT ortelecommunications outages, followed by adverse weather (40%) andservice failure by outsourced providers (37%).

However, non-physical causes of interruption (that don't deterthe immediate supply of a product or service but require crisisresponse to stakeholders or longer-term damage) made an impactfulappearance: high-profile media reporting of the danger of cyberattacks rose from 18th place in 2012 to 5th place in2013, and the non-availability of loss of talent increased from10th place to 6th.

Forty-one percent of respondents stated that customercomplaints received after a disruption increased since2012, placing it second behind loss of productivity asthe primary consequence of supply-chaindisruption. Twenty-four percent experienced reputationaldamage to their brand, but only 3% said it caused a fall in shareprice.

“Different parts of the organization need the supply chain todeliver different and potentially conflicting outcomes,” saysZurich.

The report recommends several steps to reconcile enterprise-widegaps in supply chain planning:

• Asking suppliers whether they have activated their BC planswith previous clients, and report their results.
• Asking suppliers how they identify their own 'criticalsuppliers' and what due diligence they undertake with them.
• Ensuring the vendor has a BC program and plan, the business hasrecovery capability built into their BCPs for reduced services inthe event of a supplier being impacted, as well as contingencyplans owned and developed by the business to cover total loss of amaterial supplier.
• Understanding the risk appetite of the directors of thesupplier, which can be a guide as to whether the organization takesresilience seriously and their responsibility to their customers'continuity.
• Categorizing disruptive and financially significant suppliersand conducting annual due diligence and regular meetings with theseparties.