Supply chain risk can be regarded as the exposure of a supply chain to disrupting incidents which could cause losses or delays in supplying services or products within a contractual time frame. The negative results of supply chain risk incidents can be far reaching and affect all industries and global economic growth. Industries that could be impacted are, for example, manufacturing, mining, technology, and financing.
A supply chain can be viewed in three parts, namely a supply chain management process, the transit process, and the financing process. In South Africa, specifically, these three parts are currently being negatively influenced by, for example, corruption and fraud, unprotected strikes across various sectors, an inadequate electricity supply to all industries, unwilling investors, high unemployment rate, and poor infrastructures. Although there are also other incidents such as the aftermath of the Covid-19 pandemic, the KZN floods and the Eastern Cape drought, the aforementioned could be managed by efficient corporate governance. As such, it is crucial that South Africa demonstrates a solid commitment to sound corporate governance practices. Corporate governance includes the processes, systems, and controls by which organisations operate and also indicates the relationship between those who govern and those who are governed.
A sound status of corporate governance can result in the following:
- Enhancement of corporate responsibilities including Supply Chain Management.
- Attract foreign investors.
- A positive contribution towards a positive economic growth.
- Serve as a deterrent for corruption and unethical business behaviours.
- Ensure market discipline and transparency.
- Ensure sound and practical business policies.
- Ensure the proactive management of risk exposures.
In effect, it can be deduced that a sound corporate governance can be regarded as a solid basis for the management of Supply Chain Risks, but to ensure this, it is imperative that the internal factors such as effective governance systems, relationships among key role players, sound policies and procedures and external factors such as laws, rules and regulations that provide a disciplined and ethical approach to Supply Chain Management are in place.
Furthermore, to ensure an effective management of Supply Chain risks, the following should be addressed:
- Provision of capacity to manage resources efficiently.
- Formulation, implementation and enforcing of sound policies and regulations for Supply Chain Management.
- Effective monitoring of Supply Chain processes and allocating of accountability.
- Training of all involved in Supply Chain Management to respect and adhere to the relevant rules and regulations.
- Ensuring that the Supply Chain Management process is unimpeded by fraud and corruption and other activities inconsistent with a code of ethics for Supply Chain Management.
It is envisaged that the above will ensure a level of understanding of the Supply Chain processes and the proactive management of risks. It could also form a planning basis for all involved to consider consequences of negative actions on the Supply Chain processes and the overall economy of South Africa.
Prof Jackie Young
20 September 2022
