Inbound Logistics | March 2023

RISKS&REWARDS [ INSIGHT ]

by Skyler Chi Head of Enterprise Accounts, Exiger schi@exiger.com | 212-455-9400

Preparing Now For What the Future May Bring In 2022, it became clear that effective supply chain risk management (SCRM) is not a luxury but a necessity. The year saw numerous disruptions to global supply chains, including Russia’s invasion of Ukraine, the Log4Shell vulnerability, and concerns over rail strikes.

businesses to have visibility into their supply chains. The UFLPA requires companies to perform adequate due diligence on their suppliers to ensure they are not importing goods made from forced labor in the Xinjiang region of China. NDAA 889 prohibits government contractors from providing telecommunications and surveillance goods from certain Chinese entities to the federal government. In both cases, it is the responsibility of the business to comply with these regulations. 2023: WHAT IS TO COME The effects of an economic downturn are already felt across the globe and will continue throughout 2023, leaving SCRM in a tricky position. In the United States, the impact of an economic downturn is already evident with more than 88,000 layoffs in the tech sector this year. As the economic downturn persists, companies will cut costs and run leaner supply chains. Moving back to just- in-time SCRM can negatively impact businesses, especially with heightened regulatory pressure. Companies need to nd a balance between cutting costs and ensuring compliance. Environmental, social, and governance (ESG) issues are expected to become a key focus in the context of supply chains

effects on the global economy, vendors, and supply chain that are still being felt. Following the invasion, companies needed to ensure the safety of personnel on the ground, then look to their suppliers to see the invasion’s full impact on their company. The subsequent global sanctions on Russian entities and businesses added complexity, with organizations quickly working to identify the impact of cutting ties with sanctioned entities. The swift action this required demonstrated the critical nature of supply chain visibility and robust SCRM processes. Throughout the year, cyber supply chain vulnerabilities became a major concern. In September, Microsoft conrmed two zero-day vulnerabilities. Earlier in the year, the Log4shell incident demonstrated the impact that widespread vulnerabilities in a company’s software supply chain can have. Firms found it difcult to quickly respond to, assess, and mitigate these vulnerabilities in near real time without the use of technology. Regulatory action, such as the UFLPA and NDAA 889, increased pressure on

The added complexity of new regulations such as the Uyghur Forced Labor Prevention Act (UFLPA) compounded these disruptions. It is not surprising, then, that 79% of boards responding to the EY Global Board Risk Survey 2021 believe that improving risk management will be crucial for creating value in the next ve years. As the risk and compliance environment continues to evolve in 2023, businesses must prioritize robust SCRM and third- party risk management to protect their operations from future challenges. To do this, companies need access to the data and tools that enable them to proactively strengthen their SCRM posture. By taking action now, businesses can be better prepared for whatever the future may bring. 2022: THE CASE FOR SCRM In 2022, the global supply chain faced numerous disruptions that tested the resilience of almost all businesses. In February, Russia’s Ukraine invasion resulted in signicant and immediate effects on personnel, with longstanding

28 Inbound Logistics • March 2023