Not Taking Any Risks: Companies Will Spend More On Risk Management In 2007

Disruptive natural and political events causing firms to focus on risk management in next 12 to 24 months, according to AMR Research study

Due to the increasing amount of natural and political events that can disrupt the supply chain, more companies will be focusing on risk management in 2007.

According to AMR Research's in-depth field study, released Wednesday, on the state of operational risk management technologies, 46 percent of firms surveyed plan to implement or evaluate technology for risk management over the next 12 to 24 months.

"As firms move to leaner operating models and leverage global sourcing models, uncertainty in both supply and demand is growing along with supply chain complexity," said Mark Hillman, research director, AMR Research. "As a result, the need to manage risk, specifically in supply chain, is on the rise."

For many companies, external events are the main reason for the increased corporate focus on managing risk. Survey results show that supplier failure and continuity of supply is the primary risk factor for 28 percent of firms.

Recent national and international events such as the Enron scandal, the emergence of Sarbanes-Oxley compliance, the 9/11 terrorist attacks, SARS and avian flu threats, the Asian tsunami, Hurricanes Katrina and Rita, and high-profile business failures have compelled companies to evaluate how well-prepared they are to handle catastrophe and unplanned situations.

For other organizations, strategic and execution risks are important to goal planning, such as hitting a launch window for a short lifecycle product.

    Other survey results found that:

     - 33 percent of firms have dedicated budget line items for supply chain risk management activities.

     - 54 percent of firms plan to increase their budgets for risk management over the next 12 months. Of those firms, the average spending increase will be 17 percent year-over-year.

     - The top areas of application spending to support supply chain risk management are sales and operations planning, inventory optimization, business intelligence and supply chain analytics, and supply chain visibility and event management applications.

For more information on the study, please click here.