Tuesday, May 30, 2017


Client won’t believe
Vendors are risks

A NEWS STORY MAKING THE ROUNDS reports that BMW has to slow down production due to a parts shortage from neighbor Bosch.

According to Reuters, German carmaker BMW (BMWG.DE) said a shortage of steering gears supplied by Robert Bosch [ROBG.UL] slowed production of several of its compact and mid-sized models and caused stoppages at its plants in South Africa and China.

Some companies ignore the “VENDOR THREAT” as something that could not POSSIBLY happen to them.

British Airways probably is the most famous “the vendor won’t fail us” case of a vendor bringing down a client. (Search for “British Airways and Gate Gourmet”)

I once had a potential client who wanted a risk management plan for his retail flooring store chain. (He wrongly assumed I watched and remembered his company’s commercials when he arrogantly told me that I knew his company’s tv blather.)

He told me he wanted to know how I would protect his stores while we talked on the phone. (Fat chance of THAT happening, )

    Alas, he was not the only caller who thought it OK to steal a plan over the phone; others asked for a detailed plan “right now” and over the phone. Not great for the caller — unless a practitioner knows the details of an operation, there is NO WAY that operation can be protected — and not great for the practitioner who is working for nothing — wives and other financial managers dislike giving away the product.
I asked him the origin of his product. “China,” was his response. So I told him his first risk was supply chain interruption.

"Í don’t CARE about the supply chain" he interrupted; "all I want is to protect my stores.”

No product, no store. Reasonable to me but not to the caller.

In the end we agreed that he should find another practitioner. His business still is a going concern and, I assume, he still is importing from China. What could possibly go wrong?

Let me count the ways.

      1. Defective/dangerous product (China has a reputation, after all)
      2. Manufacturer fails to receive raw materials
      3. Manufacturer unable to produce product to customer
      4. Government prevents lading onto ship -– could be Chinese or U.S. government
      5. Strike at port
      6. Ship fails to make destination port — it sinks or is high jacked for ransom
      7. Container is “lost at sea” *
      8. Strike at port
      9. Intermodal transportation is struck
      10, Truck is high jacked
      11, Traffic accident that causes product to be damaged

* I worked for a company that carried cargo around the globe; I know that containers sometimes fall overboard, especially containers that would prevent a ship from making port; e.g., a container Customs did not clear to off-load at a U.S. port

Still, the flooring company caller — did he even have the authority to engage my expertise? — wasn’t interested. His only concern was protection of the retail outlets. In the end I suggested he buy insurance and keep careful records.

I did not volunteer what TYPES insurance to buy — property, business interruption, employee (including management) theft . . . maybe even D&O. I don’t know if “hutzpah insurance” is on the market; I could have used that to protect myself from this, and similar, callers.

Some folks remain on the dark ages of Disaster Recovery.

Others, some dragged kicking and screaming, have accepted Business Continuity that focuses on what goes on within a company’s facilities.

A few enlightened managers know the only way to protect the operation is with an ENTERPRISE RISK MANAGEMENT plan that is exercised and maintained.

The enlightened managers are the ones who give an Enterprise Risk Management practitioner a reason to continue in the profession. Too bad there are so few.

PLAGIARISM is the act of appropriating the literary composition of another, or parts or passages of his writings, or the ideas or language of the same, and passing them off as the product of one’s own mind.

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