Risk Management Lessons: The horse meat scandal in Europe illustrates the risks of blindly trusting what your suppliers tell you.
European businesses are currently going through a massive scandal that has affected millions of people, billions of dollars and thousands of companies. It turns out that some meat packers have been saving money by buying horse meat and mixing it with beef. Schools, hospitals, institutions, cafeterias across the continent are suffering the consequences.
This type of situation outlines the type of risk that businesses need to be wary of: supply chain risk. The cafeteria worker serving mince meat pies at a local hospital doesn’t ever think that horsemeat is mixed in; nor does the cafeteria’s purchasing department or the delivery company or the local distributor or the regional distributor or the sales team think that. Frankly, no one along the supply chain things about the risks that can ensue from simply trusting that your upstream supply chain is sound.
Most owners and managers focus on the risks that are present within their company’s walls but few take the time, money and resources to assess supply-chain risk and devise strategies to defend against just this type of situation.
What would you do if your customers accused you of selling counterfeit parts which you sourced from various suppliers? Does your business have a strategy in place for dealing with this? Would you be able to track the culprit? More importantly,what steps are you taking to prevent problem goods and services from entering your business in the first place?
About small business finance expert Mike Periu
Mike Periu has experience in small business finance. He founded Proximo, LLC a company that offers consumer and small business training services focused on technology and money.
Mike Periu teaches individual empowerment through entrepreneurship and financial literacy. He has appeared 500+ times on television and radio. Visit the Reach and Media pages of his website to learn more about where he has appeared.
You can read more of Mike’s articles on his blog or at American Express OpenForum, Yahoo! Finanzas and the Huffington Post.
Mike has a degree in International Business and Finance which he received at Georgetown University in Washington, DC. He received a Fellowship from the Kauffman Foundation for the Labs for Enterprise Creation program in Kansas City.