As pressure on supply chains worldwide continues to grow, a new report published by the Chartered Institute of Internal Auditors (Chartered IIA) is urging boards and business leaders to take action to strengthen their supply chains by collaborating with their internal audit functions. The report, ‘Supply Chain Resilience and Security: Harnessing the Potential of Internal Audit’, underlines the need for a robust response to the mounting pressures posed by geopolitical uncertainties and climate-related extreme weather events.
The report highlights the complexities impacting supply chains; as well as paints a stark picture of the potential fallout for businesses and everyday consumers, from supply chain disruption. Empty shelves, delayed goods, damaged reputations, and business losses are the blunt realities for companies without robust supply chain resilience and security strategies. The report emphasises the role of internal audit in assuring this risk area to help safeguard the organization’s supply chain. Boards need to ensure that supply chain operations are not just efficient, but resilient enough to handle disruptions.
The report makes several recommendations:
- In light of recent major supply chain disruptions it’s crucial for boards to have a forward-looking risk management approach and to engage with internal audit functions more strategically. This involves evaluating, assuring, and enhancing the resilience of supply chains against a backdrop of geopolitical tensions, economic volatility, and accelerating climate change.
- Recognising the crucial role of robust supplier relationships in supply chain resilience, a strengthened focus on supplier management is required. Organizations need to work closely with internal audit functions to evaluate and test the resilience of their supplier networks regularly. This includes implementing effective communication channels and engaging in joint risk management exercises to ensure that suppliers are well-equipped to handle disruptions, thereby safeguarding the continuity and integrity of the supply chain.
- The importance of diversifying supply sources and localising supply chains as key strategies in mitigating risks from global disruptions is more prominent than ever. Boards should work with their internal audit functions to assess and assure the effectiveness of these strategies, ensuring that organizations are not overly dependent on single suppliers or regions and are resilient in the face of global supply chain challenges.
- Organizations need to integrate robust cyber security measures into their supply chain risk management strategies. This includes harnessing internal audit functions to proactively assess vulnerabilities and recommend enhancements to cyber defences, ensuring that supply chains are not only efficient but also secure against the growing risk of cyber-attacks.
- The adoption of technologies such as data analytics, AI, and blockchain is crucial in bolstering supply chain resilience. Organizations need to leverage these technologies to provide deeper insights into supply chain risks, enhance predictive capabilities, and improve overall supply chain management.