Risky Business: How U.S. companies can protect themselves when going abroad
As our world becomes more and more connected, things can get risky for businesses who expand their supply chains beyond their home countries.
In fact, a new study by FM Global, a mutual insurance company, found that Norway, Switzerland, and the Netherlands are the top three countries that pose the least amount of risk to supply chains. Meanwhile, Venezuela, Dominican Republic, and Nicaragua are some of the most risky countries because of having unstable economies, unethical business practices, and poor quality infrastructure. The study considered criteria, including countries' gross domestic product, government stability and infrastructure quality, among other factors.
Collectively, the United States presents a reasonably low risk for businesses, as it boasts a strong economy, good infrastructure quality and high political stability, according to Jonathan W. Hall, FM Global's Chief Operating Officer.
Tom Racciatti, a director in the Operations Excellence practice at business and technology consulting firm West Monroe Partners sat down with InsideCounsel recently to discuss what precautions companies should take when doing business with suppliers in riskier countries. “There are numerous challenges involved with directing abroad suppliers – including those rooted in communication, distance geo-political factors, control, and quality,” said Racciatti.
Some of the top line manifestations of risks include: Negative Customer Experience; Production Shutdowns; Decreased OTD based on Transit Delays and; Increased Retailer Chargebacks. Some bottom line manifestations of risks include Increased Defect Rates, Lack of Inspection Efficiency, Increased Inventory due to Lack of Responsiveness to Fluctuations in Supply and Demand, Inefficient Communication, and Increased Staffing Overhead.
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