Content thumbnail Partnering for Performance Part 1

To some extent, it helps that finance and supply chain executives Risk exposure should align with risk appetite are thinking about risk in different ways, because it ensures that As the board-level sponsor of risk management, the CFO also there is better coverage of the key exposures that the company is plays a vital role in ensuring that risks taken by the business are in likely to face . Paul van Kessel, Global Risk Leader at EY, argues line with the company’s overall risk appetite . This should include that companies need to conduct more frequent monitoring of ensuring that there is a careful balance between having a lean high-risk indicators, and ensure that they have the ability to supply chain and one that is resilient and can withstand shocks . respond quickly when the unexpected happens . “By executing Although efficient, lean supply chains are more susceptible to more quickly, they can reduce their financial loss, minimize the disruption, and this can have severe financial, as well as business, impact and perhaps come out of some of the situations in a impacts. “The balance between lean and resilient is a difficult one stronger position than their competitors,” he says . to strike,” says Alistair Davidson, Head of Staff at IKEA . “When Regulatory risks will be high on the CFO’s agenda. In 2012, for you overfocus on keeping costs low, then you might not invest example, the US Securities and Exchange Commission (SEC) enough in making sure you have a stable environment in which issued a rule to implement disclosure requirements regarding to work . And if you go completely over the top on stabilizing the “conflict minerals” as part of the Dodd-Frank Act. Conflict minerals environment, you are probably going to be giving up on part of the refer to those that originate from the Democratic Republic of the cost feature . So it’s a permanent struggle to strike that balance .” Congo, where armed groups are using the proceeds of the sale of Working together helps to mitigate risks these minerals to finance regional conflicts. This affects any SEC issuer, including foreign issuers, that manufactures or contracts to By becoming more engaged in the supply chain, business partner manufacture products where conflict minerals are used. Industries CFOs can look more deeply at exposures and assess how they are likely to be affected include electronics and communications, being managed . When asked about their key risk management 6 priorities, business partners highlight risks in the secondary and aerospace, automotive, jewelry and industrial products . tertiary supply chain as a key area of focus . This is also the number Tax risk is another important — and increasingly severe — one area of focus for heads of supply chain in business partnering risk category. Disagreements between taxpayers and tax relationships (see Chart 16). authorities, as well as between tax authorities in different jurisdictions, as to the appropriate tax treatment of the supply chain operating model can have serious financial consequences if not managed carefully . 6 Conflict minerals: What you need to know about the new disclosure and reporting requirements and how EY can help, EY, 2013. Partnering for performance Part 1: the CFO and the supply chain 31

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