Businesses reveal supply chain Brexit fears
Firms across the UK are preparing to leave the EU, yet the vast majority have concerns that it will increase risk levels in their supply chains, a new report shows.
A reliance on critical or key suppliers was the major point of concern in the Q2 2018 Global Supply Chain Risk Report from Cranfield School of Management and Dun and Bradstreet.
Having assessed supply chain risk levels faced by European firms, the report showed that supplier criticality – the percentage of buyer‐supplier relationships where the supplier is deemed to be critical or key – rose by 2% in the second quarter.
That figure forms part of wider trend that has seen risk levels rise by 12% across the last three quarters, with business owners recognising potential vulnerabilities that come with an over reliance on certain suppliers.
The report notes that while firms are taking steps to reduce the levels of risk associated with supplier failure, considerable anxiety remains over how they will operate in a post‐Brexit environment.
In order to assess risk, the report used four main metrics including supplier criticality, global sourcing risk, foreign exchange risk and supplier financial risk.
Numerous sectors showcased improvements in a number of these metrics, yet a reliance on key suppliers increased or remained high.
This was the case in the infrastructure, construction and manufacturing sectors, although it was the retail sector that provided the biggest cause for concern.
Financial risk levels for the sector rose by 2% in the second quarter, with the report suggesting that a rising number of retailers are facing greater insolvency risk as a result.
The key for businesses is to plan ahead and to take steps to mitigate risk levels, as this will provide a degree of protection in the long term.
Should business issues arise though, a firm may want to consider options reviews to find the best solution to overcome the challenges they face.
By assessing the situation, advice on the best way forward can be provided, enabling a business to develop a refinancing or restructuring strategy if required.
By Phil Smith