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Managing Risk in the Supply Chain

Too many companies in high risk industries are still making assumptions in their contracts management process and are passing on the onus for health and safety, environment and quality control to their contractors, without checking if these vital processes and procedures are being properly addressed.

Many companies often don't realise that it’s their responsibility to ensure that their contractor and sub-contractors are carrying out high risk tasks competently, with the correct staffing, management processes, policies, procedures and checks in place. Nor does it appreciate that it’s the company’s responsibility to ensure and check that contractors are carrying out the duties correctly.

Good practise must begin earlier in the process, before a contractor is appointed. It is important that Risk Based Contract Management procedures are an integral element of the company’s overall contract management process.

During the planning phase of any project, it is important to understand the risks and identify correct mitigation measures and controls. When reviewing contractor’s abilities you must ensure that effective measures are in place to vet the contractor’s ability to implement relevant risk control measures and deliver a contract which won’t have a negative impact on people, the environment, assets or your company’s reputation.

If those measures are followed through, your company and contractor’s risk awareness and expectations will improve. However bad behaviours can be very damaging, resulting in poor safety performances, or worse.

In a challenging economy, companies aim to get the best value for money, but this mustn’t be to the detriment of risk. Good behaviour should begin at board level which will influence the company culture from management down to every staff member and send a positive message to contractors and subcontractors.

Senior management must keep checking that company processes and ‘how we do business around here’ is aligned. All too often throw-away comments can be misinterpreted, resulting in short cuts and risk-taking. Continual engagement with contractors will ensure you are delivering the expected behaviour and provide individuals the empowerment to intervene and STOP before taking any chances.

Yet despite major well- published accidents, many organisations are still ‘flying by the seat of their pants’, taking unnecessary risks with contractors and their operations. But correct behaviours and practises will not only clearly outline the company’s requirements but ensure that contractors are meeting legislative requirements and good business practises.

It is no longer enough just to assume this is in place because a contractor has completed a questionnaire. A thorough analysis of the contractor’s policies, procedures and behaviours is a minimum baseline to build from. Once the contract has been awarded that is just the start, ongoing contractor relationship development and engagement will bring continuous improvement across the contract.

Remember, failure to manage risk in the supply chain could be disastrous for your company.

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