I recently learnt that avocados grow on trees.
As a millennial living in London avocados are a regular on my plate. So, I was surprised to realise I didn’t know how they were grown. But even more surprised that I had never stopped to think about it. It got me wondering: what about other familiar, everyday items? How much do we know about the origins of things we otherwise take for granted?
This opacity outside our immediate consideration is not just an issue for individuals but also for businesses.
In the face of rising pressures on global production, whether geopolitical, climatic, or legislative, it is imperative that businesses look beyond their immediate operations and into their supply chains in order to strengthen resiliency.
In the case of the avocado it would be overly simplistic to suggest that businesses do not know that they grow on trees – and that consequently they have a high water footprint. However, how far can businesses say this for all products they purchase, or is such visibility reserved for just those with increased consumer scrutiny?
Businesses have historically had a consumer-/client-led approach to risk management, which can so easily miss the bigger picture and the real risks buried within. For example, avocados indeed have a high water footprint, but cashews have a vastly greater one, consuming more than 7 times the water that avocados do.
Businesses need to move away from the reactive approach to risk management and implement a methodical risk assessment which will allow them to identify, understand and manage the risks.
We recently worked with a client who wanted to do just that. Our comprehensive assessment gave them clarity and insight into their exposure to risks. It has subsequently enabled them to implement mitigation activities focusing on areas that would have the highest impacts on their business, the environment and people. This project, while enlightening me about where avocados are grown, also provided a good example of how to ensure a proactive and resilient supply chain can be managed.
How can businesses implement a methodical risk-based approach?
- Identify relevant risks.
- What are the material issues in your sector?
- What is a priority to the business?
- Have you considered the risks beyond climate change?
- What are you customers/clients asking you about?
- Identify priority materials.
- What are the materials which are critical to your business?
- Where is most of your spend by location?
- How removed are you from the source?
- How much visibility do you have of the source?
- Map your priority materials to the relevant risks.
- Are there publicly available data sources of risk scores?
- Do you need to overweight certain risk categories?
- Are your risk scores reflective of the real world issues?
- Have you sense checked the risks against current activities you doing?
- Prioritise based on risk identified.
- Where are the gaps in current activities?
- Is there a prioritisation between risks?
- What is the most effective grouping? (i.e. by material or by location)
- Are there any information gaps which need filling?
- Develop action plans.
- What are the short- and medium-term targets and roadmap to achieve these?
- Do you need support / to join working groups?
- Are there any red lines for activities which are not acceptable? What will you do if you find them?
- What is the review period?
To discover how a systematic risk-based assessment can help you achieve greater stability and resilience in your supply chain, contact Charlotte Miller, Senior Consultant.