A recent report by the Chartered Institute of Internal Auditors (IAA) highlights the urgent need for UK businesses to strengthen their supply chains in response to increasing global pressures.
Titled Supply Chain Resilience and Security: Harnessing the Potential of Internal Audit, the report highlights the growing challenges posed by geopolitical uncertainties, extreme weather events, cyber threats, and other factors such as post-Brexit issues and the ongoing war in Ukraine.
With a risks ranging from empty shelves to severe business losses, the report underscores the importance of resilient supply chains. Businesses could potentially lose 42% of one year's EBITDA (earnings before interest, taxes, depreciation, and amortisation) every decade due to supply chain disruptions, according to a 2020 study by McKinsey.
The Chartered IAA recommends that organisations utilise internal audit functions for assurance that their supply chains can withstand disruptions and avoid reputational damage.
The report stresses the need for boards to not only focus on efficiency but also build resilience into supply chain operations to optimise financial performance and handle disruptions effectively.
Key advice includes enhancing supplier risk management, evaluating and regularly testing the resilience of supplier networks, and ensuring effective communication channels with suppliers. The report also cautions against over-reliance on single suppliers or regions.
Anne Kiem OBE, chief executive of the Chartered IIA, said:
"Reliable supply chains are the backbone of our economy and crucial for all of us to live our daily lives.
"In today's dynamic market, embracing innovative strategies and being agile in supply chain management isn't just wise - it's essential for keeping shelves stocked and lives uninterrupted. Internal audit can play a vital role in assuring that supply chains are resilient, secure and able to withstand unforeseen disruptions."
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