Enterprise and Supply Risk Management

Chair for Financial Supply Management at the European Business School (EBS) International University Schloss Reichartshausen, Oestrich-Winkel Research Director Financial Supply Management at the Supply Management Institute SMF 65201 Wiesbaden, Germany 

1 Introduction Enterprise Risk Management for Supply Management 

The third dimension contains all oiganizational entities of the company the first and second dimensions are to be applied to the third dimension. 

Based on its universal application, ERM opens up new possibilities to strive toward optimizing internal control systems, risk management systems and thus the entire corporate governance systems (Eichler and Bungartz 2004, pp. 108 and 112-113). Its importance is further exemplified by the Saibanes-Oxley Act of 2002 (SOX), where COSO s framework may become an important tool for implementing the directives set forth in the Sarbanes-Oxley Act of 2002 (Hermanson 2003, p. 3). 

From an organizational perspective, risk management is often structured at specific organizational levels (Institut der Wirtschaftsprufer in Deutschland e.V. 

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Companies should develop and implement a comprehensive Supply Risk Management system that can be integrated into corporate or Enterprise Risk Management (ERM). The process model (Matzenbacher 2003, p. 109) for Supply Risk Management (Henke and Jahns 2005, pp. 229-230) represents an important step in the right direction towards proactive and regular handhng of supply risks (please see the centre of Fig. 11.2). 

During enterprise software rollout, there is much on the line. Even small software problems can cost millions of dollars. In a high-volume supply chain, the loss of revenue can quickly exceed the total cost of the software project. Therefore, project management takes on a critical role by identifying and mitigating risks before they have an impact on the project. 

Supply chain risk management (SCRM) is based on the same methodology as enterprise risk management (ERM). it presents risk management as a process composed of a number of stages (AIRMIC/ALARM/ IRM 2002 COSO 2004 HM Treasury 2004 ISO 31000 2009 Fraser and Simkins 2010, p. 103) ... 

The higher the number of supphers and customers the more technical efficiency in terms of elechonic data interchange that is reqirired (BLL-Online 2001). The level to be reached will depend on (re-)traceabihty efforts and the costs versus benefits from risk management soluhons. Enterprises parhcipahng in the same value chain should negohate which data source should be us for what kind of information to best meet requirements for delivery traceabihty, informahon readiness and acceptable security of the food supply chain. 

This comprehensive approach allows for efficient integration between processes, different phases of product life cycle, and integration between different sites in the supply chain. This integration provides opportunity for efficiency in that process owners are integrated with each other s needs and expectations. Duplication of effort is avoided and efficiencies gained. Quality outputs from one process become reliable inputs into the next process. Management and leadership will have access and insight into compliance, infrastructure, and performance metrics of all processes on a comparable basis. This provides leadership the opportunity for risk-based resource allocation to appropriate areas of the enterprise. 

Spekman and Davis (2004) stated that risk is context specific, where differentt5q)es ofrisk affect enterprises differently. From a business context, DeLoach (2000) identified risk as the level of exposure to imcertainties that the enterprise must understand and effectively manage as it executes its strategies to achieve its business objectives and create value. Within this context, the definition of risk is clear yet broad, as business risk may refer to many functions of an enterprise. To hone the definition to apply to supply chain risk, it must be refined to emphasize supply and demand. 

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