Global supply chains are a way of life for modern businesses, but in the constant search for affordable labor and services, new challenges and risks continue to emerge.

The 2011 Tohoku, Japan earthquake and tsunami drove home the realization that a single point of failure at a single link can halt the flow of goods across an entire supply chain. To meet these challenges, businesses are finding new ways to increase communication and coordination across their supply chains, using technology to integrate systems and create contingency plans should a supplier be taken offline for any reason.

Supply chain risk

The evolution of supply chain development has brought with it an evolution of risks. Potential risks come from many directions and are not limited to physical production but include dependency on vendors for payroll, social services and benefits and causes include, for example, natural catastrophes, political risk and machine failure. Beyond the flow of goods, the quality of products can be compromised at any point along a supply chain, from the raw materials to the semi-finished product. 

Cyber is a business risk

Some supply chain trends play into the hands of those who perpetrate cyber attacks. For example, efforts to integrate supply chains by connecting systems and getting them to talk to one another create opportunities for cyber criminals to infiltrate systems throughout the chain by penetrating the weakest link.

The good news is that awareness among businesses is increasing and companies are taking the threat more seriously than ever. Whereas cyber may have been seen as an IT risk historically, it is now generally recognized as an enterprise risk management (ERM) challenge, with the conversation about how to address it elevated to include a company's board and executive team. In other words, it is becoming clear that cyber risk is a significant business risk.

Cyber liability

For a business, recognizing cyber risk within its four walls is one thing, but organizations must also understand this risk in the context of their supply chains. An attack may not be limited to a supplier's systems. A more recent trend shows cyber attacks can cause physical damage at facilities. Supply chains are becoming more integrated and connected, which carries both benefits and risks: a more integrated supply chain can enable real time communication and efficiencies but can also entail greater vulnerability.