Firms to spend more on operational risk management in 2007

Adoption of and spending on operational risk management will increase substantially in 2007, according to a recent study by AMR Research.The study reveals 46% of firms surveyed plan to implement or evaluate technologies for risk management in the next 12 to 24 months.Risk management’s emergence as a critical practice is due to the business need for global sourcing strategies, increasingly complex contract manufacturing relationships, and the greater number of natural and political events that can disrupt the supply chain, according to AMR.”As firms move to leaner operating models and leverage global sourcing models, uncertainty in both supply and demand is growing along with supply chain complexity,” said Mark Hillman, research director at AMR. “As a result, the need to manage risk, specifically in supply chain, is on the rise.”External events are largely responsible for the greater corporate focus on managing risk for many firms. The survey revealed that supplier failure and continuity of supply is the Number 1 risk factor for 28% of firms.Events such as the Enron scandal, 9/11, SARS and avian flu threats, the Asian Tsunami and Hurricanes Katrina and Rita have forced companies to evaluate how well-prepared their organizations are to handle catastrophe and unplanned events.Other survey results include:- 33% of firms have dedicated budget line items for supply chain risk management activities. – 54% of firms plan to increase their budgets for risk management over the next 12 months.- The top areas of application spending to support supply chain risk management are sales and operations planning, inventory optimization, business intelligence and supply chain visibility and event management applications.