Whitepaper: Risk management in industrial medium-sized companies

In an increasingly interconnected and globalized economy, the COVID-19 pandemic has ruthlessly exposed the vulnerability of modern supply chains. Before the pandemic, many companies saw risk management as time-consuming and with unclear benefits. However, the pandemic has drastically highlighted the costs of a lack of prevention and risk management. Production interruptions, supply bottlenecks and border closures led to business disruptions and high losses worldwide.

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Our white paper "Risk management in industrial SMEs" shows how companies can proactively counter crises with the help of strategic and resource-efficient risk management and which methods have proven successful.

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Status quo and challenges for SMEs

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Many SMEs are aware of the relevance of risk management, but implementing it often requires considerable resources - time, data and capital - which are limited, especially for SMEs. As a result, risk management is often neglected in favor of other priorities. However, as the pandemic has shown, this short-term mindset can have costly consequences and put companies at risk in the long term.

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Traditional approaches: ABC analysis and its limitations

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A frequently used approach in risk management is the ABC analysis, which categorizes risks according to their importance (A: very important, B: moderately important, C: less important). This method is widely used, but is often too coarse and one-dimensional, as only price and quantity are taken into account. This can lead to critical but quantitatively smaller components being overlooked.

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A new approach: IBR analysis (Integrated Procurement Risk)

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An alternative to the ABC analysis is the IBR analysis. This approach focuses on the actual impact of a risk factor on the company's success and prioritizes elements that are of strategic importance regardless of price and quantity. The IBR approach offers a more targeted approach by including not only economic but also qualitative factors.

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The three steps of the IBR analysis:

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1. Identification: A cross-functional team identifies the risks relevant to success along the supply chain.
2. Evaluation: Risk-relevant parts and sub-components are identified based on company data such as parts lists.
3. Implementation: The knowledge gained is applied and risk mitigation measures are implemented.

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External and internal risk factors: a differentiated view

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Risk management requires consideration of both external and internal factors. External factors such as natural disasters, political decisions or economic fluctuations can have an unpredictable impact on the supply chain. Internal factors, over which companies have more control, include internal processes, finances and human resources. Effective risk management takes both dimensions into account and develops preventive and reactive strategies for each scenario.

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Conclusion: Risk management as a competitive advantage

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The pandemic has taught companies that risk management is not a luxury, but a necessity. Strategic and well-thought-out risk management strengthens a company's resilience and ensures security of supply, which in turn creates long-term competitive advantages. For SMEs in particular, it is crucial to use efficient and targeted approaches such as IBR analysis to establish effective risk management with limited resources.

If you would like to find out more about how you can make your supply chain resilient and future-proof, download our white paper "Risk management in industrial SMEs".

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