Supply chain risks: 10 things you need to know

5 minute read
21 April 2023


Supply chains can be complex and severe operational and financial consequences can follow if supply chain risks are not managed. Taking pre-emptive action now to review your supply chain and understand possible weaknesses can help to make your business more resilient to ever-changing external conditions and can help reduce the significant time, costs and liability implications that businesses can face in the event of disruption.

To help you take that pre-emptive action, we've pulled together our top 10 key factors for you to consider in identifying and managing potential supply chain risks.

1) Complete a supply chain risk management assessment

There are measures you can take to reduce your business' likely exposure to supply chain disruption. Key clauses in supply contracts should be reviewed regularly and stress tested for their robustness, enabling you to take steps to help maintain smooth business operations and mitigate litigation risk.

2) Vary existing contracts

If fixed price and/or low margin contracts are no longer financially viable, try to re-negotiate or vary onerous contractual provisions. Make sure any changes are documented. If a variation is not possible, consider termination or assignment.

3) Manage risks in advance wherever possible

Think about whether you can obtain supplies from multiple sources, or from more local providers. Multiple sources can mean your link in the chain need only slow down if there is disruption rather than cease entirely. Local providers may be more expensive, but having supplies with a shorter distance to travel could help minimise disruption.

4) Ensure visibility in your supply chain

Keep an eye on the financial status of your suppliers – you may be able to see when problems are on the horizon. If supplies are going to be delayed, make sure you know about it in advance, so that any potential impact can be considered in advance. Longstop dates/other dates can be negotiated and expectations managed accordingly.

5) Preserve your supply chain

What happens if you know there is going to be a disruption in the supply chain? Can you/should you compel performance if supply to you is going to stop?

6) Have a contingency plan in place

What if there is disruption in the supply chain? Make sure you have a plan in place to try and reduce the impact. Check in advance whether your contracts will allow you to take the steps you may need to take.

7) Inform key team members of risk factors/monitor risks

Train your team! Make sure everyone is aware of the risk factors in your supply chain – not just those in management roles. Ensure all team members know how to escalate their concerns. Make sure all risk factors are monitored and any contingency plan is ready.

8) Have all contractual documents and all contact information available

Ensure all contractual documentation is securely stored and can be accessed easily – and identify who you will need to speak to at the businesses further down or further up the chain. Time could be of the essence if a supply chain issue arises or there is a chance an issue could arise.

9) Keep communicating

Communication in the supply chain is key. If lines of communication are open and they remain good then there is a chance that disputes can be avoided – even if the supply chain is disrupted. Just keep talking!

10) Engage in a formal dispute resolution process

If everything else fails, formal dispute resolution will be your next step. Check your contracts for dispute resolution clauses.

Are there escalation clauses in place? If so, follow them and make sure all notice provisions are followed. If a dispute with a supplier or customer becomes inevitable, we are here to help.

Risk mitigation across sectors

Risk identification is key to any supply chain management strategy, no matter the industry. However, every sector is different and therefore the specific risk events that could jeopardise business continuity can vary or be more prevalent dependent on industry or the industries within your supply chain.


Manage your supply chain disputes and issues effectively

As supply chains continue to feel the knock-on effects of a series of unprecedented world events, assessing risks and managing them effectively is essential. Our commercial dispute lawyers and sector specialists can help you with identifying and managing the potential risks in your supply chain.

Please feel free to get in touch with a member of our team if you have any queries.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.



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