Strategies for Managing Customer and Supplier Risks

A survey, sponsored by Dun & Bradstreet, of nearly 400 business executives around the world conducted in August 2013 by The Economist Intelligence Unit (EIU) sheds light on the extent to which companies are protecting themselves against risks posed by their customers and suppliers.

The majority of companies represented in the survey actively manage financial risks, but many follow less structured approach for the more specific risks that are encountered outside their organisations.

The survey also found that organisations with structured risk-management styles—both integrated ERM and collaboration among specialized risk managers—are more likely to systematically address the full range of threats confronting them, including those associated with customers and suppliers.

Why read this report

• Companies that track risk-management outcomes (about half of our respondents) report substantially better performance. Nearly 90% of those who track customer risk-management outcomes say they manage those risks successfully, compared with 54% of those who don’t. For supplier risks, similarly, 85% of those that track outcomes report successful risk management, compared with 51% of those who don’t.
• Executives say adverse supplier-related events are becoming more frequent and severe. Survey respondents who agree that supplier-related risks are worsening outnumber those that disagree by two to one. While executives are nearly as pessimistic about customer-related events, they perceive supplier-related risks as more challenging owed to limited visibility of the supply chain.
• Most ERM practitioners make heavy use of data-driven analytics. Close to 70% of survey respondents successfully practicing ERM say they employ third-party databases, predictive analysis or both. Nevertheless, more than half of respondents in this category also point to managers’ personal judgement, and 82% rely on customer engagement assessment.
• Many organisations without structured risk-management practices still report success in managing risk. A surprising 69% of these “nimble improvisers” (often representing companies with less than $500m in revenue) say they manage customer risk successfully and 61% say the same for supplier risk.