Risky Business: the trouble with low program-maturity
If having a mature compliance program that proactively identified supply chain risks was easy, everyone would have one.
But most complex manufacturers have a program with the maturity of a unicorn-themed sweet sixteen party. In fact, 76% of manufacturers rate their programs at the planning stages of supply chain sustainability maturity, according to a 2023 IndustryWeek survey.
That means the vast majority of supply chain professionals don’t have the infrastructure to identify, manage, and avoid risks compared to those with deeply sustainable mature programs.
Don't worry if your supply chain sustainability program is still in its infancy. You're in good company! However, it also means you're constantly reacting to financial, operational, and reputational risks lurking in your supply chain.
Let’s commiserate for a minute about the quirks of working with a low-maturity program, and then look at how we can help you fix them.
Money to burn: financial risks
One of the biggest frustrations about working within a low-maturity program is seeing your company pay non-compliance fines or penalties on contracts rather than spend a dime on proactive risk management. Some companies still have the old-fashioned “pay to play” attitude, and even set aside a certain amount of their annual budget to cover their compliance shortcomings. (With all that money they’re throwing on the fire, at least their office will never get cold.)
But here’s the harsh truth: paying fines instead of investing in your compliance program has no return on investment (ROI) compared to maturing risk-management processes. Globally, supply chain due diligence requirements are accelerating, meaning your bottom line will be more at risk than ever before. Plus, without a mature supply chain due diligence program, you’re also exposed to risk beyond regulatory fines, such as:
- Sanctions against overseas suppliers
- Shipments detained at the border
- Customer loss
- Being blocked from bidding on federal contracts
- Greenwashing in your supply chain
Just ask any life coach, whether that’s Deepak Chopra or Oprah – or that one woman with the crystals on social media – investing in yourself is the best thing you can do. So stop planning for failure by budgeting for non-compliance fines and start setting yourself up for success by putting that money into your supply chain program.
Smoke & mirrors: reputation at risk
When your program isn’t mature enough to track supply chain ESG, your company is more prone to reputational risks like bad press and disruptions from having to swap out a bad supplier.
In response, your company might turn to corporate social responsibility (CSR) to boost its brand and compensate for increased risk exposure.
That way, anytime someone asks why they can’t verify if your products were made with ethically sourced materials, you can direct everyone’s attention to the tree you planted last year.
And while a little attention can feel good, no one wants to be making headlines for sustainability issues like greenwashing.
But when one of your suppliers gets tangled in a non-compliance incident or you’re hit with a lawsuit over certain substances in your products (cough—PFAS), that’s exactly what can happen.
If you’re not getting ahead of risks in your supply chain, you’ll need to get ahead of the story by having a public relations expert on retainer. You know it’s time to start investing in maturing your compliance program if you have a PR pro on speed dial and the TV show Scandal starts feeling relatable.
Wouldn’t it be nice (and better for business) if you were known instead for quickly answering your customers’ compliance inquiries and delivering compliant products on time? With a more mature program that identifies, manages, and even improves supplier risks, you can have it all.
Baggage at the border: operational risks
When traveling to another country, have you ever found yourself suddenly feeling anxious for no reason at customs? You know you haven’t brought anything illegal and have nothing to declare, but a tiny voice at the back of your mind makes you worried someone slipped contraband into your suitcase, such as eighty pounds of unapproved dried beef.
With a low-maturity supply chain sustainability management program, you can enjoy that uneasy feeling every time you ship a product to another country or try to import essential parts.
All it takes is for a supplier to send a part containing a restricted substance, or to buy a material from a supplier with links to forced labor concerns, and your goods could get stopped at the border.
US manufacturers experienced this in full force in 2023, when Customs and Border Protection (CBP) stopped over 4,000 shipments of goods valued at $1.4 million under the Uyghur Forced Labor Prevention Act (UFLPA). Manufacturers that couldn’t provide detailed supply chain due diligence records lost out on months of production time, even in cases where the CBP ultimately determined the parts were compliant.
Maturing your supply chain compliance program is the only way to free your business from compliance surprises at the border and the major risk of lost market access. This requires more engagement with your suppliers, educating them about your compliance and sustainability requirements, and making it easier for them to provide accurate information securely.
Pinpoint your risks
Working with a low-maturity program is like running a three-legged race with a blindfolded partner: you might make it to the finish line, but you’re not winning any trophies. In other words, your business isn’t doomed to fail, but without a full picture of your current supply chain risks or a plan to deal with them, you’re going to face challenges your competitors won’t.
That’s why if you’re operating with a low-maturity supply chain sustainability program right now, pinpointing your risks is the right place to start. By capturing a clear picture of where your compliance program is vulnerable, you can be more strategic about investing resources and mature it more effectively. Remember, this isn’t about racing to the finish line — it’s about planned and purposeful growth.
It's time to break free from the limitations of a low-maturity program. To start you off on the right foot, Assent has created a free online risk assessment tool that will highlight your specific financial, reputational, and operational risks in just five minutes.
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