Effective Risk Management in Supply Chains

Climate risks are reshaping global value chains 🌎 Climate change is disrupting value chains at every stage — from the availability of raw materials to production, distribution, and market demand. These impacts translate into higher operating costs, reduced revenues, asset damage, and increased insurance premiums. The WEF highlights five dimensions of climate risk: natural resources, operations, assets, employees, and markets. Examples include a projected 50% decline in suitable coffee-growing regions by 2050, $15–20 billion in losses from floods in Thailand, and reduced tourism revenue following wildfires in California. These risks affect interconnected systems. A single failure — such as the collapse of a supplier or the shutdown of transport routes — can affect the entire chain. Companies need to take a systemic approach, assessing exposure and dependencies across partners, geographies, and functions. Collaboration enables cost-sharing, coordinated adaptation, and faster innovation. It also supports unified standards and better access to data and technology, which benefit not only companies but also communities and local suppliers. Adapting to climate risks is now a requirement for safeguarding operations and ensuring long-term business continuity. Delaying action increases exposure across the entire value chain. Source: WEF #sustainability #sustainable #business #esg #climatechange #risks

The Volatility-of-Volatility Term Structure - This paper studies the term structure of the VVIX (volatility of volatility), a measure of expected volatility changes in the VIX (volatility index). Here are the key findings: Informational Content of VVIX Slope: The study reveals that the slope, not the level, of the VVIX term structure holds significant information about vol-of-vol risk. A steeper slope predicts positive returns on S&P 500 and VIX straddles (options that profit from price movements in either direction). Importance of Vol-of-Vol Risk: The paper highlights that VVIX slope offers unique insights beyond the VIX term structure and variance risk premium (VRP). This implies vol-of-vol risk is crucial not just for VIX options, but also for stock index options like the S&P 500. Decomposing VVIX Term Structure: The research employs a model to explore the drivers behind the VVIX slope. It identifies continuous vol-of-vol and jump risk as the main contributors, with their influence varying based on economic conditions. Economic State and VVIX Slope: During calm markets (low q/V ratio), jump risk and a constant term dominate the VVIX, leading to a flat term structure. Conversely, in turbulent markets (high q/V ratio), continuous vol-of-vol risk takes center stage, causing a steeper slope. VVIX Slope and Market Downturns: Analyzing major crises, the study shows that the VVIX slope captures a shift in the composition of vol-of-vol risk. Initially, jump risk is prominent. However, as the crisis unfolds, volatility uncertainty becomes the primary driver, suggesting market participants anticipate prolonged volatility. Overall, the paper emphasizes the significance of the VVIX slope as a predictor of returns and a valuable tool for understanding the dynamics of vol-of-vol risk in the context of stock and VIX options.

In March 2024, and for the fourth consecutive month, #Arctic sea ice reached a record low (based on Copernicus ECMWF Climate Change Services data) - setting the stage for unprecedented geopolitical, commercial, and environmental implications. What does it mean for global commerce and strategy? 🚢 New Shipping Routes Emerging: Soon, previously inaccessible Arctic passages will open, drastically reshaping global shipping lanes, supply chain logistics, and trade economics. Businesses must prepare for these changes and the geopolitical complexities that come with them. 🔋 Resource Rush and Strategic Interests: As ice retreats, critical minerals, energy reserves, and new commercial opportunities emerge, setting the stage for intensified geopolitical competition in the region. ⚠️ Climate Risk and Responsibility: The Arctic melt accelerates global warming through feedback loops—the diminishing ice exposes dark ocean waters that absorb more heat, further intensifying global climate impacts. The ripple effects on weather patterns and extreme events globally pose serious risks for supply chains, infrastructure, agriculture, and insurance sectors. Climate change is not a distant threat. It is reshaping our global landscape today, redefining strategic priorities, operational risks, and competitive advantages. 👉 Companies that proactively integrate climate intelligence into strategic planning will lead. Those that wait will inevitably be left behind. We are witnessing firsthand how these shifts reshape our world and how climate science can guide companies through the emerging complexities, anticipate risks and identify opportunities in this new global frontier. How is your company preparing to navigate these new global realities? #ClimateRisk #SustainabilityLeadership #GlobalBusiness #Geopolitics #ArcticOpportunities #StrategicRisk #BoardroomLeadership Source: Financial Times

Your Procurement Cycle is a Minefield of Risks. Are You Walking Blind? Procurement Excellence | 17 JAN 2026 - Procurement always navigates hidden risks that can derail projects, inflate costs, and tarnish reputations. Ignoring them? That’s the real risk. Here are 7 CRITICAL risks lurking in your procurement cycle + how to defuse them: #1. Performance Risk ↳Suppliers underdelivering on quality/timelines. ↳Fix: Clear KPIs. Penalty clauses. Regular performance reviews. #2.Specification Risk ↳Vague requirements lead to wrong deliverables. ↳Fix:Collaborate with stakeholders upfront & freeze specs before sourcing. #3. Supplier Financial Risk ↳Bankrupt suppliers = halted operations. ↳Fix:Run credit checks, diversify suppliers, demand financial disclosures. #4. Reputation Risk (ESG) ↳Child labor or pollution in supply chain = brand crisis. ↳Fix: Supplier ESG screenings. Audits. Sustainability clauses. #5. Price Volatility Risk ↳Market swings crush budgets. ↳Fix: Fixed-price contracts. Hedging strategies. Cost-indexed clauses. #6. Fraud & Corruption Risk ↳Kickbacks, fake invoicing, collusion. ↳Fix: Segregate duties. Whistleblower policies. AI-powered anomaly detection. #7. Contract Leakage Risk ↳Unused discounts, auto-renewals, scope creep. ↳Fix:Centralized contract repository. Milestone alerts. Spend analytics. #Bonus I: Over-Reliance Risk ↳One supplier holds 80% of your spend. ↳Fix: Strategic supplier diversification. #Bonus II: Cybersecurity Risk ↳Suppliers accessing your systems >>data breaches. ↳Fix:Vendor security assessments. Zero-trust architecture. #Bonus III: Supply Disruption Risk ↳Natural disasters, geopolitics or supplier failures. ↳Fix: Dual sourcing, Safety stock & Real-time supply chain monitoring. Risk Mitigation Playbook: ✅ Proactive: Map risks at EVERY stage ✅ Use AI for predictive analytics, blockchain for traceability. ✅ Train & empower teams to spot red flags early. ✅ Collaborate & partner with Legal, Finance, Operations. Risk-aware procurement NOT about avoiding suppliers Procurement can’t own risk alone! Build resilient, ethical & agile supply chains that drive sustainable value. What risks keep YOU up at night? ♻️ Share to help someone in your network. ➕️ Follow Frederick for more content like this. #ProcurementExcellence #RiskManagement #Leadership

📍🔵 Mastering the Risk Control Structure: A Balanced Defense Strategy for Every Organization 🔴📍 An effective risk management system relies heavily on a well-structured control environment. The 'Risk Control Structure' diagram presented here offers a simple yet powerful visualization of the three core control types every organization must implement to mitigate risk: Preventive, Detective, and Corrective Controls. 🔵 At the heart of the diagram lies RISK, reminding us that all control efforts originate from the need to manage it. From there, the control architecture branches into three essential components: 🔵 Preventive Controls 📍 Objective: To stop risk events before they occur. 📍 Examples: Access controls, segregation of duties, employee training, robust policies and procedures. 📍 Why it matters: These are your first line of defense, proactively reducing exposure and limiting the possibility of errors, fraud, or system breakdowns. 🔵 Detective Controls 📍 Objective: To identify and flag risk events after they happen. 📍 Examples: System logs, internal audits, reconciliations, surveillance systems. 📍 Why it matters: These controls enable timely detection and escalation of issues, minimizing impact and supporting quick response. 🔵 Corrective Controls 📍 Objective: To fix the effects of a risk event and restore operations. 📍 Examples: Incident response plans, system patches, disciplinary action, recovery strategies. 📍 Why it matters: These controls help recover from disruptions and build resilience by ensuring that lessons learned are integrated into future preventive efforts. 🔴 Why this structure is important: - It ensures a comprehensive defense-in-depth approach. - Promotes continuous improvement by linking cause, detection, and correction. - Enhances audit readiness and regulatory compliance. - Supports a mature control environment across all business functions. 📍 Together, these three types of controls form the backbone of a robust internal control system, safeguarding your organization from both known and emerging risks. #OperationalRisk #Governance #RiskManagement #EnterpriseRiskManagement

The growing complexity of supply chain interdependencies is creating significant cybersecurity risks. In my latest article for the World Economic Forum’s Centre for Cybersecurity, I outline five key risk factors and what organisations must do to mitigate them: 1️⃣ Cyber Inequity – Large organisations are improving cyber resilience, but SMEs remain vulnerable. They must view cybersecurity as a business priority, while industry collaboration and policy support can help bridge the gap. 2️⃣ Limited Supply Chain Visibility – Expanding supply chains make it harder to assess supplier security. Without clear incentives, compliance gaps persist, increasing exposure to cyber threats. 3️⃣ Third-Party Software Vulnerabilities – AI and open-source adoption introduce new risks, yet only 37% of organisations assess AI tool security before deployment. A structured security framework is essential. 4️⃣ Dependence on Critical Providers – Over-reliance on a few key suppliers creates systemic points of failure. Resilient IT architectures and strong business continuity planning are critical. 5️⃣ Geopolitical Risks – Cyber threats are increasingly shaped by global tensions, disrupting supply chains and increasing attack sophistication. Organisations must integrate geopolitical risk assessments into their cybersecurity strategies. 𝗪𝗵𝗮𝘁’𝘀 𝗡𝗲𝘅𝘁? Organisations must prioritize visibility, support smaller partners, and invest in resilience. Strong business continuity planning, robust IT management, and proactive threat detection are non-negotiable. Cybersecurity is not just an IT issue—it’s a strategic imperative. Read the full article here: https://lnkd.in/g-yQ2QRa #CyberSecurity #SupplyChain #AI #RiskManagement

AI is not coming for ALL procurement jobs. But let’s be honest, some roles are disappearing faster than we think. We’ve seen AI reshape industries before, but procurement and supply chain are now at a turning point. 🔹 McKinsey reports that up to 60% of procurement tasks could be automated. 🔹 Gartner predicts that by 2026, 75% of large enterprises will have AI-driven procurement tools. 🔹 Amazon’s AI-powered supply chain models have cut inventory errors by 50%. I personally see two types of conversations happening: 1️⃣ The Doomsayers – AI will replace everyone. 2️⃣ The Deniers – Procurement is too complex for AI to take over. The truth? AI will automate transactional tasks first, but strategic procurement isn't going anywhere. 🔹 Already being replaced: Purchase order processing Invoice approvals Basic spend analysis Low-value sourcing 🔹 AI will assist, but not replace: Category management Contract negotiations Supplier risk management 🔹 AI cannot replace (yet): Complex supplier relationships Ethical & sustainable procurement Crisis management & strategic leadership If Your Role Is at Risk, Here’s What to Do: 1️⃣ Learn Procurement Analytics Get hands-on with SQL, Power BI, or predictive modelling to move beyond basic reporting. 2️⃣ Get Supplier & Stakeholder Experience Shadow senior colleagues, lead a small negotiation, or take ownership of a contract renewal. 3️⃣ Build Risk & ESG Expertise Take free courses on risk management and sustainability (Coursera, CIPS, MIT) and apply them. 4️⃣ Join Cross-Functional Projects Get involved in cost-saving, supplier innovation, or sustainability initiatives to gain strategic exposure. The shift is already happening: The procurement professionals who adapt and upskill will lead the industry. Those who rely on manual processes won’t last. Where does your job fall? 👇

CBAM -2026 From 1 January 2026, Indian steel and aluminium exports to Europe will quietly but decisively become more expensive. The reason is the EU’s Carbon Border Adjustment Mechanism (CBAM)—a carbon tax on imports based on emissions generated during production. Estimates suggest CBAM could wipe out 16–22% of net realised prices, force contract renegotiations, and weaken India’s position in the EU—still a key market absorbing about 22% of India’s steel and aluminium exports. The pain has already started. In FY2025, India’s steel and aluminium exports to the EU fell to $5.8 billion, a 24% decline from the previous year—even though CBAM payments haven’t begun yet. The drop followed the October 2023 transition phase, which made plant-level emissions reporting mandatory. Compliance costs, data gaps, and verification hurdles pushed many firms to scale back exports early. Why the EU Is Doing This CBAM extends Europe’s carbon pricing system to imports. EU producers already pay for emissions under the EU Emissions Trading System (ETS). CBAM ensures foreign suppliers face a similar cost, preventing “carbon leakage” to countries with weaker climate rules. The mechanism currently covers steel, aluminium, cement, fertilisers, electricity, and hydrogen, with expansion planned. The UK is moving in the same direction. Why the Numbers Are Brutal Coal-based BF-BOF steel emits about 2.4 tonnes of CO₂ per tonne. At today’s EU carbon price (~€80), that’s €192 per tonne in carbon cost. Buyers are expected to pass back 50–70% of this burden—cutting exporter revenues by €95–€133 per tonne. A €600 sale can quickly drop to €467–€505. Data Is the New Battleground CBAM is not about ESG narratives. It is factory-level carbon accounting. Only Scope 1 and Scope 2 emissions count. If exporters fail to provide verified data, EU importers apply default values 30–80% higher, sometimes nearly double actual emissions. The result: deeper price cuts or lost orders. The Bigger Issue CBAM applies rich-country carbon prices to developing economies. The EU charges ~€80 per tonne; China’s carbon price is about one-tenth of that. India’s future price will be lower too. Steel and aluminium—responsible for ~10% of global emissions—are now among the most protected sectors in the developed world: • U.S. tariffs up to 50% • EU carbon tax on imports Climate policy and industrial protection are clearly overlapping. What India Must Do India needs a CBAM resolution in the EU-India FTA, stronger domestic carbon accounting, and support for cleaner production routes. CBAM is not a compliance footnote. It is a structural shift in global trade. As carbon becomes a trade currency, competitiveness will be measured not just by cost—but by emissions per tonne. My piece in Indian Express

90% of mistakes made in production are the brands fault. Most people assume: → “The factory messed up the sizing.” → “They used the wrong fabric.” → “The colour came out different.” But here’s the truth after years working with 700+ brands and suppliers across 4 continents: It’s rarely the manufacturer’s fault. Here’s where things really go wrong: 1) Vague tech packs If your spec sheet says “standard fit” or “premium cotton” you’ve already lost. Factories can’t read your mind. 2) Skipping pre-production testing Most brands approve samples without wash testing, stretch testing, or fit validation. Then act surprised when bulk turns out differently. 3) Last-minute changes Every tweak resets the process. Change fabric weight or print placement at the 11th hour, and your factory is just firefighting. 4) No version control Brands send multiple conflicting PDFs, WhatsApps, and screenshots. Factories follow the wrong file and get blamed for “errors.” 5) Zero tolerance buffer No production ever runs 100% perfect. Professional brands build in QC allowances and contingency plans. Amateurs point fingers. The truth? Factories don’t ruin products. Processes do. -- If you’re scaling a fashion brand & want to eliminate these issues. I’ll be sharing my Pre-Production Accuracy Checklist next week. Comment CHECKLIST below and I’ll send it early. Must be connected. #fashionmanufacturing #operations #production #supplychain #fashionbrands

Sourcing and supply chain, pointers from years of practical experience... 🧵 At The Pant Project we come from a family background of ~50 years of experience in textile manufacturing. As a brand, we work with vendors across India to procure the highest quality materials for our product. What have we learnt in this time about how to manage supply chains? 1. Trust is everything. If your vendors trust you to lift goods, make payments, and honour your commitments, then you are golden. If they don’t trust you, then no amount of legal documentation or paperwork can make the relationship work. Trust is built over time, with consistently honouring your commitments. Trust takes a lot of time to build up, and just a few bad experiences to lose forever. 2. Processes > people. At scale, if you are person dependent, things are bound to break. You need to have set standard operating procedures (SOPs) for everything from raw material inward to pre production processes, mid-line inspection, final quality control, packing and dispatch, else you have no way to control irregularities in quality. You also need a kaizen mindset to continuously make micro-improvements. 3. Cost is just one factor in deciding which vendor to partner with. While it’s important to optimise for the right purchase price, there are a host of other things to consider when choosing a manufacturing partner. Speed of delivery, flexibility on minimum order quantities, and quality of the product matter a lot. So it’s a vendor scorecard of all of the above that determine who wins the right to produce what & how much for your brand. 4. Diversify your supply chain, but not too much. While it’s important to have multiple partners for each critical component or SKU to minimise single party dependency risk, it is also important to give meaningful volumes to select partners so you are a relevant part of their annual operating plan and get the priority service that your brand needs. We see too many brands making the mistake of splitting volumes across too many factories before hitting meaningful scale, and they have no control anywhere. Like with any investment portfolio, while diversification protects against the downside, if you know what you are doing, some level of concentration into high conviction bets (factories) leads to outsized returns. 5. Invest in product R&D, it’s worth it in the long run. Becoming a pure commodity player is a race to the bottom. There are real innovations to be made at a yarn level, fabric technology level and garment design & engineering level, and you have to invest the $$$ upfront to reap the long term benefits. So invest in R&D to stay ahead of the curve, and co-create, collaborating closely with your supply chain partners, or run the risk of becoming irrelevant over time. The strength of your supply chain is the backbone of your brand.