Risk management. Knowledge based on experience

Recognising and preventing risks is learned through experience (one's own or others')

We can divide risk in different ways. For example, we have political risks, natural disasters, financial risks, technological risks, supplier dependency, legal ... Another perspective can also be taken: known and unknown risks. In the case of known risks, we have experienced them in the past, unfortunately often on our own skin. To save ourselves pain in the future and applying the principle of „lesson-learnt” we implement appropriate preventive measures. Every industry has examples of this. In aviation, because there was damage to aircraft engines by birds, the so-called „ test " began to be used.„bird strike„. Another interesting test is Fan Blade-off, based on its results, solutions have been introduced to avoid tragic failures, such as hull penetration or engine fires.

Risk management. May it be as rare as possible inhe knowledge gained about on your own

In the case of unknown risks that no one has yet encountered, it is worse. An interesting case in the automotive sector could be so-called connected cars. Cars that are connected to a network and therefore exposed to the risk of a cyber attack and, for example, a hacker taking control of the car. Arguably, many companies are working on appropriate security measures, which will have to be improved on an ongoing basis as the techniques used by hackers develop. This is a risk that the automotive industry has not faced on a large scale.

If we have not encountered a risk before, it is difficult for us to perceive it and assess its impact on business

Arguably, most companies will now be implementing a solution related to situations similar to the coronavirus, stress testing and analysing how vulnerable they are and how prepared they are to deal with a similar threat in the future. But will this be enough?

A sound analysis should take into account the different categories of risks, a comparison with experience in other industries so that we do not overlook something that others have learned from. In the case of supplier management, in addition to risks related to Q (quality), D (on-time delivery), C (cost), T (technology), we should also consider M (management), which includes contractual risks, the financial situation of the supplier, among others.

Given the increasing aspirations of Polish suppliers to enter the premier league in industries such as automotive, aviation and rail, it is reasonable to analyse contractual risk and to place emphasis on verifying the records that the company has with customers and suppliers - „flow-down”, i.e. the transfer of selected conditions that we have with customers to suppliers. Stopping an OEM factory costs up to €30,000/minute  A stoppage of one shift adds up to an astronomical €14.4m! These costs are made up of, among other things: wages of production staff, stopping and restarting machines, express transport (e.g. taking out aircraft), lost profits... If this is caused by the supplier then the client will try to pass at least part of these costs on to him. Can the company afford to do this? It is crucial to understand what the consequences of a default may be, the reasons may be internal or caused by sub-suppliers.

Stopping the factory by the OEM is a cost even
€30,000/minute. What consequences will we face for not honouring the contract?

Audit risks in the supply chain and implement supplier management tools such as ESSA, help to avoid costly mistakes. Eveneum's experts have had to deal with bankrupt suppliers during a crisis, allocation of raw materials, takeovers of suppliers by competitors, disruptions caused by natural disasters. By looking at your situation, an external consultant is able to see risks that you may not see, and can juxtapose your company's situation with their own experiences. All this is done in order to define the risks, determine their criticality for your company and develop a plan to counteract them.