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Companies need to monitor, map entire supply chain to mitigate risks

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While it can be difficult, companies should assess the risks along the length of the supply chain and map the chain to effectively manage supply chain risks, experts say.

The more analysis companies do of their supply chain exposures through risk management or procurement, the better, said Linda Conrad, director of strategic business risk for Zurich Global Corporate at Zurich Insurance Group Ltd. in New York. “To do it right, risk management should have a big role to play in this,” she said.

Tom Teixeira, partner in Willis Group Holdings P.L.C.'s Willis Group Solutions consulting unit in London, said recent events have forced many companies to recognize the need to achieve greater supply chain transparency. “I'm seeing a lot of effort, a lot of investment, a lot of structures being set up to really get to know the supply chain,” he said.

“The first line of attack that they're using is the regional offices,” Mr. Teixeira said. And many companies are using software and mapping applications to determine where suppliers are, the perils they face, and to recognize supply chain interdependencies, he said.

Industrywide groups also have helped addressed supply chain exposures in some industries like high tech, though it's “no substitute for doing your own supplier risk assessment, your own supplier mapping,” Ms. Conrad said.

Gary S. Lynch, managing director and global leader of risk intelligence and supply chain resiliency at Marsh Inc.'s risk consulting practice in New York, said in some cases companies can work with nongovernmental organizations to help them understand risks associated with some suppliers along their supply chain.

It's also essential to understand the cost of risk associated with supply chain decisions, and risk management has to help in translating that cost of risk in the actual dollars so it can be factored into the decision-making, Mr. Lynch said.

“What we're seeing is a growing awareness of that risk and a growing movement to address that risk,” said Andrew Hersh, a director at Aon Global Risk Consulting in New York. “But I think there's a ways to go for the tangible cost of risk to be included in the decision measurements that the C-suites of companies receive.”