© GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.©GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.
ANATOMY OF SUPPLY CHAIN RISK
Andrea Bonime-Blanc, JD/PhDCEO, GEC Risk Advisory LLC
NACD Board Leadership Conference – October 2013
© GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.
Major Kinks In The Supply Chain I
EXCERPT FROM A NEW YORK TIMES STORY*: CHINA
“Inspectors came and went from a Walmart-certified factory in Guangdong Province in China, approving its production of more than $2 million in specialty items that would land on Walmart’s shelves in time for Christmas.
But unknown to the inspectors, none of the playful items, including reindeer suits and Mrs. Claus dresses for dogs, that were supplied to Walmart had been manufactured at the factory. Instead, Chinese workers sewed the goods — which had been ordered by the Quaker Pet Group, a company based in New Jersey — at a rogue factory that had not gone through the certification process set by Walmart for labor, worker safety or quality, according to documents and interviews with officials involved.
To receive approval for shipment to Walmart, a Quaker subcontractor just moved the items over to the approved factory, where they were presented to inspectors as though they had been stitched together there and never left the premises.
Soon after the merchandise reached Walmart stores, it began falling apart.”
*The New York Times, “Fast and Flawed Inspections of Companies Abroad”. September 1, 2013
© GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.
EXCERPT FROM A NEW YORK TIMES STORY*: BANGLADESH
“Fifteen hundred miles to the west, the Rosita Knitwear factory in northwestern Bangladesh — which made sweaters for companies across Europe — passed an inspection audit with high grades. A team of four monitors gave the factory hundreds of approving check marks. In all 12 major categories, including working hours, compensation, management practices and health and safety, the factory received the top grade of “good.” “Working Conditions — No complaints from the workers,” the auditors wrote.
In February 2012, 10 months after that inspection, Rosita’s workers rampaged through the factory, vandalizing its machinery and accusing management of reneging on promised raises, bonuses and overtime pay. Some claimed that they had been sexually harassed or beaten by guards. Not a hint of those grievances was reported in the audit.”
Major Kinks In The Supply Chain II
*The New York Times, “Fast and Flawed Inspections of Companies Abroad”. September 1, 2013
© GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.
Supply Chain Governance, Risk & Reputation Management
I II III IV V VI VII VIIIA weak link in the chain exposes risks that if unattended or ignored can grow into
material reputational risks too
Multiple sources
Multiple 3dParties
Transportation& Logistics bothInternal/external
Manufacturing& Assembly
Retail &Customer
QUALITY ENVIRONMENTAL IMPACT HEALTH & SAFETY
EXPORT CONTROLS FRAUD
Distribution Sales & Re-sales
ProductQuality Controls
AUDIT FAILURE
CYBERCRIME
INTERNAL CONTROLS FAILURE THIRD PARTY DUE DILIGENCE
CORRUPTION: PRIVATE & PUBLIC
CLIMATE CHANGE LABOR RIGHTS HUMAN RIGHTS
MISREPRESENTATION
IMPORT CONTROLS
© GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.
Checks & Balances Required Throughout The Supply Chain
Crisis Management
Business Ethics &
Compliance
Enterprise Risk
Management
Procurement & Operations
Business Continuity
Import/Export Trade Compliance
Anti-Corruption
Specialized Audits
Internal Audit
External Audits
ISO / other Certifications
Board of Directors
© GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.
Supply Chain Governance, Risk & Compliance Fundamentals
1. Supply Chain Risk Baseline Assessment and Continuous Risk Management
2. One Corporate Owner for Overall Supply Chain Risk3. Cross-Functional Supply Chain Risk Management Team4. Clear Global Supply Chain Communications, Policies, and
Training 5. Supply Chain Third Party Pre-Screening 6. Supply Chain Third Party Checking, Testing & Auditing 7. Speak-Up Culture about Risks Generally and Supply Chain
Risks Specifically8. Board Oversight and Reporting
© GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.
Resources on Supply Chain Risk Management
Ethical Corporation Magazine - The GlobalEthicist Monthly Column: http://www.ethicalcorp.com/users/andrea-bonime-blanc
© GEC Risk Advisory LLC 2013. All Rights Reserved. Confidential & Proprietary Information.
For Further Information
8
Andrea Bonime-Blanc, JD/PhDCEO, GEC Risk Advisory LLC
New York, New York USAhttp://www.gecrisk.com
The GlobalEthicist Ethical Corporation Magazine Monthly Column:
http://www.ethicalcorp.com/users/andrea-bonime-blanc
T: +1.917.848.4448F: +1.212.501.8326
[email protected] www.linkedin.com/in/andreabonimeblanc
