It’s no secret that COVID-19 has caused major disruptions to endless industries both in Australia and across the globe. The retail sector has been one of the hardest hit, with Forrester earlier this year forecasting global retail sales in 2020 to decline by an average of 9.6% globally – a loss of $2.1 trillion. The market research company also suggested that it may take four years for retailers to overtake pre-pandemic levels.

With that being said, there are many questions surrounding the current and future state of the industry’s supply chain risk management model, and what lessons can be learned from this year’s unpreparedness.

In the last year, Australia has experienced back-to-back crises from bushfires and floods through to the COVID-19 pandemic – all of which have exposed the vulnerabilities in traditional supply chain models for many retailers.

The scale of the damage due to this year’s collective crises has begun to shift local business leader’s mindsets around how we forecast, approach, plan for and respond to risk. As with any crisis, the pandemic presents a unique opportunity to explore other ways to manage and mitigate risk within the supply chain.

At the 2020 Retail Summit, the consensus mirrored the global sentiment that no one’s supply chains were prepared for such an event and that on-shore manufacturing was going to be looked at to help avoid risk moving forward.[1] At this point, there is no doubt that risk management is being catapulted onto the agenda of boardrooms and CEOs, where it belongs.

So, how can retailers better manage supply chain risk in the current and post-COVID era?

Risk management as a shared responsibility

If we’ve learned nothing else this year, it’s that risk management is a critical business function that can no longer be siloed or be passively managed.

We often promote the terminology of ‘risk being everyone’s business’, essentially meaning that managing risk should not sit with one person or department but with those working within the supply chain, to the warehouse, to the CFO as a fully collective responsibility. 

Democratise business-critical data across functions

In a hyper-connected and fast-paced world, organisations need to have access to the right data, in real time. Only this will allow retailers to make accurate, timely and confident critical business decisions.

For example, if an overseas supplier has been impacted by an environmental or health issue affecting business operations – it’s crucial that retailers in Australia have access to this information as soon as possible in order to make adjustments to their business model and communicate such changes to their key stakeholders.

Post-COVID risk management must evolve from impromptu actions and decisions taken by individual departments to a more holistic view of risk that involves multiple stakeholders inside the enterprise. In order to successfully do so, individual departments must have clearly defined swim lanes mapped to their spheres of responsibility as well as equal access to relevant information on unfolding events so that when a risk occurs, the response is orderly and efficient.

As risk diversifies, so much your planning

Corporate risk management needs to shift to a long-term, proactive function focused on building business resilience, rather than a short-term, reactive function focused on mitigation.

For example, scenario testing needs to become the new norm and both risk managers and boards need to proactively come up with new scenarios on a regular basis, and test against them.

It is also important to open lines of communications across the organisation, and encourage every department – under the risk team’s coordination – to proactively share regular updates and data and quickly assess potential risks to the business.

Organisations within the retail sector have never had to face such a variety, volume and complexity of risk.

With the events of 2020 having disrupted an already fragile industry, now is the time for the retail sector to invest in and think carefully about its supply chain risk management strategy. The implications of getting it wrong would be dramatic for the whole industry as we now know that the pandemic is just one of the many risks organisations are exposed to. Risk management can no longer be a box-ticking process anymore, preparedness is now a necessity.

Ed Pullen is director for Australia and New Zealand at Dataminr