The document discusses how emerging markets can enhance their supply chains to diversify risks and sustain economic growth. It notes that suppliers are exposed to risks like natural disasters and political instability. The expert recommends that emerging markets focus on diversifying these risks by strengthening supply chain networks. Outsourcing parts of the supply chain can transfer risks to other parties while gaining benefits like reduced costs and access to new technologies. Effective risk management involves identifying, assessing, prioritizing, and developing actions to mitigate risks across the supply chain.

1. Article Critique :
Emerging markets to enhance supply
chain to diversify risks
BWFF 5063 FINANCIAL RISK
MANAGEMENT
PROF. RASID

2. EMERGING MARKETS TO ENHANCE SUPPLY
CHAIN TO DIVERSIFY RISKS
KUALA LUMPUR, Nov 22 (Bernama ) -- Emerging markets need
to look at enhancing their supply chain network to diversify
business risks as part of efforts to sustain economic growth in
their countries, says an industry expert. Geoffrey
Riddell, Chairman Asia Pacific and Middle East, Zurich Financial
Services, said supply chain was an important and critical
component in business.
"Suppliers are exposed to natural catastrophe and political
risk. Therefore, emerging markets should focus on diversifying
risk," said Riddell, who is one of the panelists at the Global
Business Leaders Forum 2010 here today. He was talking on
promoting new economic linkages between developed and
developing world.
The forum was organised by the Commonwealth Business
Council in Collaboration with the Asian Strategy and Leadership
Institute (ASLI) and the Malaysia Investment Development
Authority (MIDA).

3. Risks in supply chain
management issue in supply
- Risk and uncertainty has always been an important
chain management.
- The most issues being discussed regards to supply is the risks in
relation :
* supply lead time reliability,
* price uncertainty,
* demand volatility which lead to the need for safety stock,
* inventory pooling strategy,
* order split to suppliers, and various contract and hedging
strategies
* delays of materials from suppliers,
* large forecast errors,
* system breakdowns, capacity issues,
* inventory problems, and disruptions.

4. Risks in supply chain
• management
Risk management processes refer to the stages a
supply chain or a company could follow to reduce
the supply chain risks.
• It normally involves such activities as identifying
supply chain risks events, assessing the
probabilities and the severity of
impacts, prioritizing the risk event to be dealt
with and developing actions for mitigating risks or
planning for backups actions.
• The risk management involves the course of
actions to consider in order to reduce the risks.
This can be done by reducing the probability of
occurrence , the severity of impacts or both.
• Generally speaking, the supply chain risks
include: need risk, supply risk, management
risk, information technology risk and system risk

5. Risks in supply chain
management option as
- risk management involves such
transferring it to or sharing it with other
parties, accepting it as it is or avoiding the
risks which is a common practices by
supply chain management nowadays.
- Outsourcing/subcontracting practices
allows supply chain risks to be
transferred to the parties providing the
product or services.
- Risk sharing maybe developed in terms
of a joint collaboration for risks
involving two or more parties in a supply

6. Risks in supply chain
management
Parties involved in supply chain

7. Risks in supply chain
• management
Need risk: it is includes the rate decline of satisfying important need
because of inventory shortage, the unforeseen variation of seasonal
need, the high rate of new products coming up, the low rate of
customer loyalty, dependence to some crucial customers.
• Supply risk referring to the accounting of some suppliers is
incomplete, the quality problem of suppliers, inflexibility
supplier, dependence to few key suppliers.
• Management risk which explain that productivity doesn’t live up to
the expectation, it is about the shortage or surplus of product
ability, the break of producing because of inventory shortage, the
quality standard of suppliers low to the acceptable level of market.
• Environment risk also included natural disaster, industry policy
risk, political conflicts leading to the break of supply chain, exchange
rate risk and so on.
• Information technology risk also give an impact to supply chain as
the incomplete storage of historical data, the loss of important data in
the process of transmitting, the failure of information infrastructure

8. Risks in supply chain
management
- Nestle defines supply chain management as
the two-way management of the flow of
goods, services and information from
suppliers to
manufacturers, wholesalers, distributors, st
ores to the end user.
- Supply chain management is especially
critical for the food industry because of the
ease of spoilage.
- Even though Nestle feels responsible for
every link in the supply chain, it outsources
many of those activities as no company can
claim to do everything from A to Z in the

9. Risks in supply chain
management
• Current situation with Internet
access, companies manage their supply
chains through an efficient interface
with an e-Marketplace. It is a
tremendous opportunity for Nestle
to work effectively to create new
levels of performance.
• Companies have to optimize internal
processes to remain competitive in a

10. Cost savings arise from several sources. As Figure 1 displays, the cost savings possible with
a SaaS WMS for a small- or medium-sized warehouse (or for one-fourth of a large
warehouse) with a $2-10 million inventory level is $330,000 savings the first year and
$230,000 in subsequent years.

11. Risks in supply chain
management
Sony, Post-sales
An service
Financial Logistics
Outsourcing functions
Company
Outsourcers Parts Distribution
could manufacture Core
provide Competency
Best in the world at
Marketing electromechanical Accounting
miniaturization design
Employee
benefit Maintenance
management
Real estate
management

12. Risks in supply chain
-
management Unipart
Case study : relationship between
Logistics and Jaguar which is been declared
as example of Performance-Based
Outsourcing.
- In the course of their relationship, Jaguar
defined a series of strategic goals, one of
which was to earn a number one (1) ranking
from J.D. Power and Associates.
- One tactic for reaching that goal was to
improve customer service in Jaguar’s
aftermarket parts business. This resulting
that logistics have to plays a key role in
making sure that the right part is in the

13. Risks in supply chain
management
 Outsourcing has become a major strategy
as firms move toward specialization
 Increasing expertise
 Reduced cost of reliable transportation
 Rapid deployment of telecommunications
and computers
– the Internet

14. Risks in supply chain
management
Advantageous of outsourcing
 Cost savings
 Gaining outside experience
 Improving operations and service
 Focusing on core competencies
 Gaining outside technologies
 Other advantages

15. Risks in supply chain
management
Disadvantagous of outsourcing
 Increased transportation costs
 Loss of control
 Creating future competition
 Negative impact on employees
 Longer-term
impact

16. Risks in supply chain
Risk rating
management
Definition or explanation
Critical Once the risk occurs, the object of the
whole module will be fail
Serious Once the risk occurs, the index level of
object module will be reduced seriously
Moderate Once the risk occurs, the corresponding
module object will be effected moderately,
but the object can be realized partly
Minor Once the risk occurs, the corresponding
module object will be effected slightly, but
can be reached
Negligible Once the risk occurs, the corresponding
module object will not be effected and can
be reach completely

17. Risks in supply chain
management

18. Risks in supply chain
management
Conclusion:
It is important for the company to
enhance the supply chain network
to sustain economic growth
One of the best ways to diversify
business risks as suppliers are
exposed to natural catastrophe
and political risk is by outsourcing
The advantages of outsourcing as it
would provide cheaper and better
quality labour and also there’s