De-risking your supply chain post COVID-19
COVID-19 has caused lots of disruption to supply chains, not just in the UK but internationally. Consequently, many businesses are now reviewing their supply-chains and considering ways in which they can ‘de-risk’ them to avoid future disruption, should the worst happen and there are second waves of the virus or disruption again in the future.
How can businesses de-risk their supply chains?
Some strategies that a business might consider to de-risk its supply chains are:
- mapping out its supply chains and identifying any perceived risks – completing this exercise not just for COVID-19 but other crises, such as a financial crisis or natural disaster;
- stress test each element of its supply chains;
- create a contingency plan for each step of its supply chains e.g. multiple suppliers; and
- looking beyond its supply chains to its suppliers’ supply chains and if possible, identifying any risks in those.
‘Project Defend’ – The UK government is de-risking
‘Project Defend’ is a project that the UK government is undertaking to de-risk its own supply chains as a result of COVID-19, particularly with medical and strategic/non-food essential imports. The impetus is on reducing the reliance on imports and to diversify its supply chains as much as possible.
When considering future supply chains, it is important to get contractual provisions in place to set out the relationship with each supplier that can cater for any future disruption. It is advisable to have a clear force majeure clause and to consider how a second wave or future disruption could affect the supplier’s ability to perform under the contract.
For existing contracts, it is a good idea to take the time to review them now, if you have not done so already, and to consider what provisions exist for disruption, such as force majeure clauses. This should also form part of any risk assessment of the key weaknesses in a business’ supply chains.
Legal advice when preparing supply contracts is always advisable. COVID-19 has provided a stark reminder of the vulnerability of many supply-chains and it is important to take the opportunity to review existing arrangements, as well those in the future.Back to Our Thinking →