FM Global Study Reveals U.S. Corporate Growth in Global Sourcing Activities Expected, Despite Increased Supply Chain Risk Exposure and Risk Management Gaps
A new study of U.S. financial executives has found that although a substantial number recognize global sourcing activities place their companies at greater risk, a solid majority expect global sourcing to increase during the next three years, and many feel a lack of control over their supply chain partners' risk management practices.
Johnston, RI (Vocus/PRWEB ) May 7, 2009 -- A new study of U.S. financial executives has found that although a substantial number recognize global sourcing activities place their companies at greater risk, a solid majority expect global sourcing to increase during the next three years, and many feel a lack of control over their supply chain partners' risk management practices.
The study, commissioned by FM Global, one of the world's largest business property insurers, and conducted by CFO Research Services--also reveals that natural disasters and physical failures, such as manmade disasters and equipment failures at company-owned facilities, have negatively affected financial performance at a substantial number of companies in recent years.
The research, Physical Risks to the Supply Chain: The View from Finance, can be downloaded at www.fmglobal.com/news and focuses on an often overlooked category of supply chain risk-- the threats to physical assets along the supply chain, including infrastructure breakdown, facilities and equipment failures, and other physical hazards. The results are based on responses received during late 2008 and early 2009 from 169 senior financial executives at U.S. companies with annual revenue ranging from US$500 million to more than US$20 billion and representing nearly every industry.
"Given the majority of financial executives surveyed plan to increase their current global sourcing practices, it is imperative for companies to acknowledge and address growing supply chain risks," said Bret Ahnell, senior vice president, FM Global. "In today's economy, a significant supply chain disruption could have a catastrophic business impact."
In particular, the study reveals:
Increased Global Sourcing Contributes to Greater Risk Exposure: Sixty-two percent of respondents expect global sourcing activities to increase during the next three years, and 39 percent confirm that their company's current global sourcing strategies increase their exposure to physical risks along the supply chain.
Physical Risks Impact Financial Performance: More than 40 percent of financial executives confirmed their company has experienced an unexpected physical disruption from internal facilities or equipment failures during the past several years that negatively affected financial performance. In addition, since 2003, 45 percent of respondents' companies have fallen victim to natural disasters that negatively affected their financial performance.
Need for Improved Risk Management Practices: While most respondents said their companies are performing adequately in assessing supply chain risk, nearly 40 percent said there is room for improvement. Many participants said it's important to:
1. Choose vendors carefully
2. Be knowledgeable about one's suppliers and diversify them to reduce risk exposure
3. Be methodical about managing supply chain risk
"Global sourcing can bring an abundance of new risks, but it also can be a great opportunity for companies to gain a competitive advantage," said Ahnell. "Businesses that develop supply chain resiliency not only protect themselves against supply chain interruption, but also potentially position themselves to capture market share from competitors that do not."
About FM Global
Established nearly 175 years ago, FM Global (www.fmglobal.com) ranks 766 among FORTUNE Magazine's largest companies in America. More than one out of every three FORTUNE 1000 companies and similar-sized organizations operating in more than 130 countries work with FM Global to develop robust property insurance and engineering solutions to protect their business operations from fire, natural disasters and other types of property risk. The company has been named "Best Property Insurer in the World" by Euromoney magazine and "Best Global Property Insurer" by Global Finance magazine. The company is rated A+ (Superior) by A.M. Best and AA (Very Strong) by Fitch Ratings.
About CFO Research Services
CFO Research Services (www.cforesearch.com) is the sponsored research unit of CFO Publishing Corp., which publishes CFO magazine in the United States and Europe. CFO Publishing is an Economist Group business.
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