Koray Köse is a supply chain expert, tech futurist, author, former Gartner analyst, and now Chief Industry Officer at Everstream Analytics.
Holistic risk management is a comprehensive approach to understanding, evaluating and managing risks across an organization or a specific domain. It involves creating a framework that aligns with the organization’s vision, determining its risk appetite, assessing risk capacity and establishing governance.
To complete a holistic risk assessment, organizations must understand key risk indicators. They must also examine their tolerance for uncertainty as well as an array of critical changes and internal and external factors.
This article will look at how technology is reshaping holistic risk management with the supply chain, where holistic risk management plays a key role in mitigating threats, utilizing opportunities in value chains and considering factors like loss prevention and risk capacity.
Due to the supply chain’s complexity and its critical role in generating revenue and driving innovation, organizations should understand how to enhance its resilience, agility, sustainability and cybersecurity by prioritizing supply-chain risk management within the broader context of holistic risk assessment.
The Core Components Of Holistic Risk Management
Advanced analytics and data integration are now foundational to holistic risk management. New technologies like AI, ML and LLMs, for example, connect variables, dependencies and influencing factors to boost accuracy and confidence. In short, every data asset can provide value in gaining a deeper understanding of each key risk indicator.
Handling data effectively in holistic risk assessment, however, requires several things: data governance, fit-for-purpose data integration tools, applied analytics techniques, augmented data security and agile cross-functional collaboration.
When this foundation is built properly, holistic risk management augments critical areas of the value creation and orchestration flow by:
• Creating Full-Scale Visibility: Full-scale visibility gives organizations real-time insights into their supply chain operations, enabling them to detect changes and potential risks and disruptions early on.
• Understanding Interconnected Risks: Risks are rarely isolated. In the VUCA, PESTLE and other analysis approaches, it’s critical to consider the influence and causation. They often have cascading effects, where a disruption in one area can trigger a chain reaction of problems throughout the organization. Holistic risk assessment helps identify these interdependencies and enables organizations to address root causes rather than just symptoms.
• Optimizing Resource Allocation And Risk Capacity Management: Organizations have finite resources for risk management, utilization and mitigation. By identifying and prioritizing risks through a holistic approach, they can allocate resources where they will have the most significant impact.
• Managing Globalization and Complexity: In today’s globalized and interconnected world, supply chains have become increasingly complex and sophisticated. Raw materials, components and finished products can traverse the globe multiple times through multiple modes and nodes of transportation before reaching the end customer and then its recycling or waste journey. This complexity amplifies the potential risks and underscores the need for a holistic approach to risk assessment.
• Securing Regulatory Compliance And Governance: Many industries face stringent regulatory requirements for supply chain practices. Failure to meet these regulations can result in fines, legal issues, reputational damage and exclusion. A holistic approach ensures compliance risks are adequately addressed in the right context and by the correct levers and stakeholders.
• Driving ESG And Anti-Modern Slavery: Sustainability risks—including environmental and social factors, especially forced labor and modern-day slavery and carbon-footprint management—have gained momentum through new legislation and enforcement globally. A holistic approach considers these requirements, ensuring that organizations manage these risks not only reactively but proactively align their operations with sustainability goals and expectations for higher purpose-driven organizations.
• Boosting Cybersecurity: Supply chains rely heavily on data and information exchange through digital technologies, making them susceptible to cyber threats. Holistic risk assessment incorporates cybersecurity as a critical component to safeguard operations and data integrity. It is a supply chain topic as much as an IT topic.
More verticals benefit and should be incorporated into holistic risk management like quality, planning, R&D and others because holistic risk assessment provides a comprehensive view and actionable insight into all potential uncertainties, their interconnections and their impact on the organization.
How To Get Started With Holistic Risk Management
Beyond incorporating technology, organizations will need to take several steps to adopt holistic risk management.
Organizations, for example, must prioritize value over cost and (re-)structure their processes accordingly. This involves implementing policies for lifetime valuation using proven models like holistic cost valuations and total cost of ownership.
Translating the business strategy into a dynamic risk appetite, anchored in key risk indicators specific to value creation, guides organizational evolution, fostering resilience and focus on high-impact activities. The risk appetite needs to adapt to internal and external factors to keep pace with innovation, geopolitics and geoeconomics. This necessitates careful change management and democratization of data access. A prime example of this approach is the European automotive industry initiative, Catena-X, which was founded on radical collaboration through an open data ecosystem.
With established processes and data infrastructure, the final critical factor is talent. Recruitment and development should prioritize disruptors, innovators, connectors, challengers and influencers with deep expertise. These attributes counter complacency, organizational overactivity and underproductivity, ensuring organizational agility, self-disruption and adaptation.
Holistic risk management isn’t for organizations that like the status quo. It challenges traditional playbooks, making every day an opportunity for risk management to make a difference. The future is defined not by past events but by the continuous evaluation and response to each situation in the core value creation flow.
The Future Today
By prioritizing supply chain risk management within the broader context of holistic risk assessment, organizations can more effectively navigate the complex and interconnected challenges of the modern world.
As a result, organizations that embrace value creation and orchestration in supply chains will define markets, create new products faster, set standards and embed risk management into their top-line growth and bottom-line optimization. By focusing on the day after tomorrow while having tomorrow’s innovations lined up, they are more likely to enjoy all the strategic benefits of first-mover advantage.
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