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AFP Press Release

Four Steps to Improving Risk Management in the Supply Chain

AFP and Oliver Wyman introduce a practical guide to help companies assess creditworthiness of vendors, manufacturers, suppliers.

WASHINGTON, D.C. –– June 15, 2011–– In today’s global business environment, companies must maintain vigilance about potential business disruptions, especially those relating to their supply chain, according to a new report conducted by Oliver Wyman in collaboration with the Association for Financial Professionals (AFP).  In-Practice Guide: Managing Risk in the Supply Chain, the latest in the Financial Insights Series by Oliver Wyman and AFP, helps companies determine their exposure to disruption risk, manage the cost of disruptions, and limit the potential risk management impacts of those disruptions.

Just as a bank or credit rating agency must perform a series of evaluations to determine a subject’s creditworthiness, corporate finance professionals should use the In-Practice Guide as a tool in assessing the creditworthiness of counterparties.

“Supply chains have lengthened,” said Brian Kalish, AFP’s finance practice lead.  “U.S.-based multinationals may be sourcing from China, shipping on Greek vessels and doing business in the Pacific Northwest.  Along the way, problems with any service providers may hurt the company’s business and reputation. This guide provides a framework for managing risks.”

Overall, the In-Practice Guide provides a four-part approach to improving risk management as it relates to:

  • Identifying critical counterparties
  • Determining the proper metrics
  • Converting metrics into probabilities and estimates
  • Evaluating the results into improved risk management decisions

The new guide is a companion piece to The New Weakest Link in Your Supply Chain: Supplier Credit Why Companies Need to Behave More Like Their Own Credit Rating Agencies published by Oliver Wyman and AFP  in November 2010. It builds on the previous publication by providing the practical steps that companies should follow to execute a successful supply chain risk management program.

Download the 16-page guide here: www.afponline.org/risk  

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