Supply Chain Risk Management

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9

Emerging Risk Management

Frameworks for Success

Our focus in this chapter will be on emerging frameworks that are being

leveraged to drive successful supply chain risk management (SCRM)

initiatives. We will become grounded with basic denitions and explore

some of the new frameworks, standards, and rules and regulations that

frame the supply chain risk management landscape. We’ll then prole the

frameworks from several research organizations’ perspectives and present

several leading companies who are utilizing these frameworks to imple-

ment risk initiatives within their organizations. We’ll conclude by high-

lighting several benets to be derived from utilizing these frameworks.

WHAT IS A FRAMEWORK?

A framework is a skeletal, openwork, or structural frame. is term also

describes a frame of reference, which includes an arbitrary set of axes with

reference to which the position or motion of something is described or

physical laws are formulated.

1

One professional organization proles the

term framework in several perspectives. One perspective provides a con-

cept revolving around organizational design by viewing a framework as

an organizational structure to support the strategic business plans and

goals of an enterprise (e.g., for- prot and not- for- prot companies). Given

the mission and business strategy, the organizational structure design

provides the framework within which operational and management

activities will be performed. A second perspective revolves around the

operating environment and views a framework as the global, domestic,

166 • Supply Chain Risk Management: An Emerging Discipline

environmental, and stakeholder inuences that aect the key competi-

tive factors, customer needs, culture, and philosophy of each individual

company. is environment becomes the framework in which business

strategy is developed and implemented.

2

FRAMEWORKS SUPPORTING THE NEW SUPPLY

CHAIN RISK MANAGEMENT DISCIPLINE

Whether you are in operations, nance, distribution, banking, or aca-

demia, several frameworks are critical for supply chain risk management.

Recall that Chapter1 dened SCRM, which is expanded here to refer to

the implementation of strategies to manage everyday and exceptional risks

within the supply chain through continuous risk identication, assess-

ment, mitigation, and management with the objective of reducing vulner-

ability and ensuring sustainability. We view SCRM as the intersection of

supply chain management and risk management. Let’s discuss several of

the critical frameworks.

Enterprise Risk Management (ERM) Framework

As mentioned in Chapter1, the general ERM framework has been around

for many years, emanating from the nance and classical risk insurance

disciplines. We’ll take a high- level view at ERM rst, and then dig deeper

with proles from CAS, the Casualty Actuarial Society. Recall that

Chapter1 provided one perspective of ERM. A second perspective is from

CAS, which has dened ERM as the discipline by which an organization

in any industry assesses, controls, exploits, nances, and monitors risks

from all sources for the purpose of increasing the organization’s short-

and long- term value to its shareholders.

ERM can also be described as a risk- based approach to managing an

enterprise, integrating concepts of strategic planning, operations man-

agement, and internal control. ERM is still evolving to address the needs

of various stakeholders who want to understand the broad spectrum of

risks facing complex organizations and their supply chains to ensure they

are appropriately managed. Government regulators and debt- rating agen-

cies have increased their scrutiny of the risk management processes of

many companies.