Supply Chain Risk Management Blog
The Paris attacks have been another harsh reminder that the risks the world faces are increasingly global. Being in the West does not make us immune to the threat of ISIS.
Unlike terrorism, however, natural disasters are often assumed to be more predictable; if we don’t know when, we can often make good guesses at what and where they might strike. Risk modelling for the likes of hurricanes, floods and – perhaps most all – earthquakes is predicated on that. Nevertheless, it is vital to regularly review supply chain exposures, and keep in mind the uncertainties that should prompt us to be prepared for the unexpected.
This has been a key lesson from previous catastrophes. The Japanese earthquake of 2011 was a good example: the place was not a surprising, but the magnitude – 9.0 on the Richter scale – was far stronger than anything thought possible at the time. And, of course, the impacts were felt worldwide, with US automotive supply chains, for example, suffering impacts comparable to some in Japan.
The US itself is not immune from the danger of direct shocks either. The risk from the San Andreas fault is so well known it has had its own summer blockbuster. In reality, any quake there is unlikely to live up to Hollywood’s imagination, but the devastation that follows, from fires to floods could be significant. Moreover, once activity starts, it could continue for years.
In fact, San Andreas is not necessarily the biggest geological threat the US faces; near it is the Cascadia subduction zone, much less well known but with the potential to produce a quake and tsunami that could kill nearly thirteen thousand people and displace one million, according to the US Federal Emergency Management Agency (FEMA). The 1980 eruption of St Helens, meanwhile, was a reminder of a volcanic risk where understanding is still developing both in relation to St Helens, and Yellow Stone National Park.
The point is that businesses cannot afford to look to their supply chain resilience purely in the light of historic disasters. Resilience is only possible by assuming the worst could happen, and that you probably haven’t yet thought of what the worst actually is.