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15 October 2014

IRM criticises "box-ticking approach to risk management"

Content team

The Institute of Risk Management (IRM) has hit out at the 'box-ticking' approach to supply chain risk, which it believes is prevalent in the business world.

In a new report, the organisation has called for organisations to instead develop a focus on behavioural risk. It claimed simply responding to problems with systems and processes overlooks the need to understand and predict human behaviour and build trust.

Peter Neville Lewis, one of the authors of the report, stated: "Ticking boxes is easy - and dangerous. Developing a sophisticated understanding of 'personal risk management' may be harder but, as companies as diverse as John Lewis and Tata Industries show, it helps create the ethical behaviour that controls risk across an organisation - however big or complex."

Carolyn Williams, IRM technical director and editor of the report, expressed her disappointment at research released by the Chartered Institute of Purchasing and Supply that found around three-quarters of supply chain professionals admit to having no visibility of the early stages of their supply chain. As a result, the organisation warned the UK is on the verge of a supply chain crisis.

"This is the human cost of wilful blindness in extended enterprise risk," she stated, calling on businesses to stop "expressing remorse" and instead take action to resolve behavioural uncertainties.

The IRM report, titled 'Extended Enterprise: Managing risk in complex 21st century organisations', included a number of questions it said businesses should ask of themselves regarding their supply chain risk.

Among these are thinking about whether the risk culture of other participants fit in with that of the organisation, and whether the necessary resources are in place for an effective risk management programme.

The IRM said shareholders have a direct interest in an organisation's approach to supply chain risk, as a report from the World Economic Forum last year revealed supply chain disruption reduced affected companies' share price by an average of seven per cent.

Content team, Bureau van Dijk

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