Man-made risk refers to disasters that are a result of human intent or negligence, as opposed to natural disasters. These risks can be caused by crime, arson, civil disorder, terrorism, war, biological/chemical threat, strikes, labor disputes, and more. They can affect direct suppliers, but they can also occur anywhere throughout the supply chain, such as sub-tier suppliers, shipping, and other logistics service providers.
Man-made risks can be caused by human action or inaction, or sometimes by pure bad luck. Examples include the Evergreen getting stuck in the Suez Canal and the collapse of a bridge in Baltimore due to a collision with a ship that lost power because a crew member accidentally closed an inline engine exhaust damper.
Negative Outcomes for Businesses
- Interruption of supply: Disruptions can lead to short- or long-term supply interruption, which can change costs for the buyer.
- Loss of short-term sales: Supply interruption can result in losses in sales and profits, and in the worst case, complete shutdowns.
- Quality issues: If the affected supplier must start operating from new premises, with new processes and equipment, there can be short-term quality issues.
- Finding new sources of supply: Securing alternative sources of supply is time-consuming and not without risk.
- Changes in the marketplace: Extreme man-made risk events can change the dynamics of the marketplace, putting surviving suppliers in a more powerful position to negotiate.
Mitigating Man-Made Risks
To mitigate man-made risk, buying organizations need to understand the risk and put contingency plans in place. They also need to be able to respond quickly to these events. This can be achieved by keeping close contact with the supplier and using intelligence and risk-alert tools that cover the entire supply chain.
It is essential for businesses to be prepared for any potential man-made risks that may occur throughout the supply chain to ensure continuity and resilience.
