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Assessing and Mitigating Financial Supply Chain Risks

All supply chain operations face risk. For banks and financial institutions the risk is even greater. In the latest Precision Report, we look at threats to the banking supply chain and the steps financial institutions can take to mitigate risk.

Even the best run organizations with robust supply chains and mature business processes face external threats. Natural disasters, geopolitical upheavals, shifting trading relationships, labor shortages, cyber attacks, theft and loss can all impact supply chains and the smooth running of business.

For banks and financial institutions, the risks are even higher. Security is especially critical in the financial supply chain because of the sensitive nature of shipments.

A 2018 Dun & Bradstreet survey of 1,100 financial risk professionals ranked supply chain disruption as the foremost risk they faced. Over a third — 38 percent — called monitoring risks within the customer, supplier, or partner base a “high” risk.

To Mitigate Risk, You Need Good Data

To understand the threats your enterprise faces and how best to mitigate them, you need to undertake a risk assessment. You need to analyze your business processes, what works well and what you could improve. A risk assessment is not something you can do once and call it a day. Business environments, competitive landscapes and technology are all subject to change. Risk assessment should be an ongoing process.

Financial institutions need global, system-wide visibility into their logistics and supply chain processes. It is impossible to know where the threats truly are if you have blind spots.

Unfortunately, blind spots are common. The Dun & Bradstreet report suggests that many financial leaders lack the necessary tools for forecasting and monitoring risk.

Although they may use in-house analytics, credit reports and third-party data, over half of respondents noted difficulty sharing data or using data to drive risk mitigation strategies. It’s not the lack of data that’s the problem — it’s lack of integrated data. Over 60 percent of respondent said that their data currently exists in silos.  

Therefore, the first crucial step in mitigating risk is effective data management. Data needs to be fully integrated and leveraged across the organization.

Reducing Risk

To make a complete assessment of your current processes, you will have to identify areas of risk. This means means considering risk from several angles. Let’s take a look at some of the most common ones.


The regulatory landscape is not static. New free trade agreements, such as the recent EU-Japan Economic Partnership Agreement, changes to existing ones like the disengagement of the UK from the European Union can impact financial supply chains. Supply chains have to be nimble to keep up with these changes.


Nearly a third of the cost of logistics disruptions is as a result of loss or theft. Money shipments are high-risk targets, so this is a constant threat for banking and financial security firms.

Banks also need to keep a close eye on geopolitical and other events that could potentially cause upswings in criminal activity in all the countries, territories or even cities that they serve.


Ensuring that each machine has cash available for withdrawal is already a huge undertaking. Banks need contingency plans should natural disasters strike. Predicting disasters may be impossible, but weather events — particularly if extreme weather such as hurricanes, typhoons or heavy snowfall are common at certain times of the year. Weather events that occur in regions with less infrastructure can be especially challenging. Without insight into alternate carriers and rerouting options, logistics operations at the mercy of the weather.


Risk and internal expertise are intrinsically linked. If — or when — you manage requirements outside your area of expertise, risk of regulatory missteps or supply chain disruptions increase. When this happens, an organization must either develop the expertise needed, or outsource this to a trusted expert.

One example is entering new markets where you lack in-country expertise. There are many countries where carriers can only provide limited service, or only serve certain regions. Risk of crime also varies by country, as well as region-by-region. Working with in-country or regional experts can reduce risk in countries where you lack this kind of expertise.

To reduce your risk you must thoroughly understanding the threats your organization faces. You must also consider how these threats could change over time.

Plan for the Inevitable

From the risk of natural disasters to human factors such as loss or theft, risk to the financial supply chain is nearly inevitable. However, with proper planning you can mitigate those risks. The key is to separate predictable and unpredictable risks.

To do this, you’ll want to gather business intelligence about your logistics performance and try to identify patterns. You’ll likely discover that some of the risks your business faces are predictable, such as seasonal “rushes” or slow periods. Even some “unpredictable” natural disasters – such as weather – may not be predictable but have a seasonal and regional component.

Even in terms of physical loss and theft, it may be difficult to determine which specific loads may become targets, but you can usually identify specific routes or regions where theft is a bigger concern.

By studying the intelligence that’s available to you in this way, you’ll gain a better understanding of the risks your financial logistics operation faces, and be able to identify those areas where you can make improvements that can reduce the risk to your global financial supply chain.

About QAD Precision – Trusted Global Trade and Transportation Execution

QAD Precision (Precision Software), a division of QAD Inc., provides industry-leading global trade management, transportation execution and multi carrier shipping software solutions from a single, integrated platform. Preeminent industry leaders in every region of the world rely on QAD Precision’s global support centers to leverage thousands of carriers and manage millions of shipping transactions every day. Our open architecture easily integrates with Enterprise Resource Planning, Warehouse Management Systems and legacy solutions. An ISO-certified company, QAD Precision assists companies to minimize shipping costs, optimize first mile and last mile deliveries, automate free trade agreement compliance, avoid customs delays and mitigate the risks associated with dynamic trading environments to maximize their competitive advantage. QAD Precision’s customers span multiple industries including banking and finance, life sciences, high technology, retail, industrial, automotive, higher education and public sector as well as logistics providers. For more information about QAD Precision, visit www.precisionsoftware.com.


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