Identifying & Mitigating Risk In Your Supply Chain

We are well aware of the benefits to businesses of maintaining a healthy supply chain and the impact when the supply chain is not operating as it should, so it worries us that so many businesses are failing to build continuity plans into their supply chain. 

The first step to ensuring the continuity of your business should critical software within your supply chain falter or fail is to begin with an effective Supply Chain Risk Management (SCRM) plan. This will help you ensure that your supply chain remains operational even in the event of supplier failure. 

SCRM focuses on four key areas: 

Exposure: SCRM should involve all stakeholders directly involved with the business-critical software application. 

Resilience: Supply chain resilience ensures that your supply chain has the ability to bounce back from unexpected events, respond to disruption and recover. 

Time To recover: This is the time it takes for a company to get back to 100% operational following a major supplier disruption. Typically, this involves procuring a new software application. 

Measuring Risk: The most popular way to measure risk is to look at the likelihood of an events occurrence and its impact on your business. Being able to identify where the risks lie within your supply chain is the first step to mitigating risk and building business continuity to protect against unforeseen circumstances. 

The issue with supply chain risk however is that the risks don’t occur in isolation. Often, once a risk appears in one area of your supply chain the issue quickly spreads across your supply chain. 

Take warehouse software as an example. This software is designed to support key areas of your business (such as sale, operations and logistics) and optimise warehouse functionality. 

If the supplier for your warehouse software was unable to continue supporting and developing their application, how would that affect your ability to process orders, distribution to customers, stock control, staffing and a number of other business critical functions? 

In the event of supplier failure, the impact to your business can be quite catastrophic and in many instances it is difficult to procure an application that will fulfil your unique requirements in time to minimise the impact to your business. 

However, Software Escrow offers a solution.

Entering into a Software Escrow agreement with the developer of your application and an independent Escrow Agent protects your business and provides business continuity in the event of supplier failure. 

Under the terms of an Escrow agreement, the software supplier deposits a copy of your applications source code, all other relevant material (and data if your application is hosted) with an Escrow Agent. This can then be release back to you in the event and Escrow trigger event occurs, enabling you to continue using and supporting the application until the point in time which a suitable replacement can be procured. This minimises the impact to your business and saves you from the loss of revenue and reputational damage associated with supplier failure and inability to deliver your product or service. 

If you would like to discuss identifying and mitigating risks within your supply chain and how a Software Escrow agreement can protect you against these circumstances, please get in touch to speak to one of our specialists. 

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