As pressure grows on supply chains worldwide, a new report published by the Chartered Institute of Internal Auditors (Chartered IIA) is urging boards and business leaders to take action to strengthen their supply chains by collaborating with their internal audit functions.
The report, titled “Supply Chain Resilience and Security: Harnessing the Potential of Internal Audit” underlines the need for a robust response to the mounting pressures posed by geopolitical uncertainties and climate-related extreme weather events.
The report highlights the complexities impacting supply chains; as well as paints a stark picture of the potential fallout for businesses and everyday consumers, from supply chain disruption.
Empty shelves, delayed goods, damaged reputations, and business losses are the blunt realities for companies without robust supply chain resilience and security strategies.
The report emphasises the role of internal audit in assuring this risk area to help safeguard the organisation’s supply chain. Boards need to ensure that supply chain operations are not just efficient, but resilient enough to handle disruptions.
The report makes several recommendations
In light of recent major supply chain disruptions including those caused by Brexit, the pandemic, the War in Ukraine and climate-related extreme weather events, it’s crucial for boards to have a forward-looking risk management approach and to engage with internal audit functions more strategically.
This involves evaluating, assuring, and enhancing the resilience of supply chains against a backdrop of geopolitical tensions, economic volatility, and accelerating climate change.
By recognising the crucial role of robust supplier relationships in supply chain resilience, a strengthened focus on supplier management is required. Organisations need to work closely with internal audit functions to evaluate and test the resilience of their supplier networks regularly.
This includes implementing effective communication channels and engaging in joint risk management exercises to ensure suppliers are well-equipped to handle disruptions, thereby safeguarding the continuity and integrity of the supply chain.
The importance of diversifying supply sources and localising supply chains as key strategies in mitigating risks from global disruptions is more prominent than ever.
Boards should work with their internal audit functions to assess and assure the effectiveness of these strategies, ensuring that organisations are not overly dependent on single suppliers or regions and are resilient in the face of global supply chain challenges.
With the rise in cyber threats, the need for organisations to integrate robust cybersecurity measures into their supply chain risk management strategies is vital. This includes harnessing internal audit functions to proactively assess vulnerabilities and recommend enhancements to cyber defences, ensuring that supply chains are not only efficient but also secure against the growing risk of cyber-attacks.
The adoption of technologies such as data analytics, AI, and blockchain is crucial in bolstering supply chain resilience. Organisations need to leverage these technologies to provide deeper insights into supply chain risks, enhance predictive capabilities, and improve overall supply chain management.
“Reliable supply chains are the backbone of our economy and crucial for all of us to live our daily lives” says Anne Kiem OBE, Chief Executive of the Chartered Institute of Internal Auditors.
“In today’s dynamic market, embracing innovative strategies and being agile in supply chain management isn’t just wise – it’s essential for keeping shelves stocked and lives uninterrupted. Internal audit can play a vital role in assuring that supply chains are resilient, secure, and able to withstand unforeseen disruptions.”
Richard Chambers, Senior Internal Audit Advisor at AuditBoard, added, “This report highlights the important role that internal audit can play in supporting businesses to enhance their supply chain resilience.
“By integrating advanced analytics and a proactive risk assessment approach, internal audit can not only pinpoint where potential vulnerabilities are, but actively help enhance strategies that ensure an organisation’s supply chain is agile, secure, and capable of withstanding unforeseen global shocks like wars, pandemics, and other crises.”